• Debt settlement can help a person improve their credit score.hand holding credit card image by patrimonio designs from Fotolia.com
  
  When a person gets behind on his bills and creditors start reporting accounts as late to the credit bureaus, he may believe there are only two solutions to the problem: file for bankruptcy or continue to pay what he can, when he can and watch his scores continue to plummet. However, for some, debt settlement programs are a viable option. These program counselors call the person's creditors and negotiate lower rates.
  
  

Scores Below 600

• If a debt settlement program can be successfully completed, the negative impact on the credit score and rating would be minimal. However, since the low score indicates a large number of accounts have been entered into the repayment program, filing for bankruptcy could repair the credit score in a more timely fashion, and have less of an impact than a debt settlement program. According to the United States Bankruptcy Court's website, a Chapter 7 bankruptcy case can be completed in as little as four months, whereas a debt settlement program is not complete until all debt is repaid.
  
  

Scores Between 600 and 700

• Debt settlement will have a small negative impact on credit scores in this range, but the benefits of paying off the debt will outweigh the score impact. If possible, only the accounts which are the most past due or accounts that are causing the biggest impact on the credit score should be included in the settlement program. The lower the percentage of active accounts in the program, the less impact the program will have on the credit report and score.
  
  

Scores Above 700

• Debt settlement could have a significant negative impact on a credit score higher than 700. According to Debtsteps.com, with a score in this range, refinancing the current mortgage or taking out a home equity loan is an ideal approach.