When it comes to debt relief, there’s good news and bad news. The good news is that many debt relief programs can substantially improve your credit score. The bad news is that many debt relief programs can also cause those precious numbers to go down. When you’ve got overwhelming debt, of course, you want to get those numbers as high as possible. Understanding what impacts your credit score and what you can do to help it will make it easier to find success in your quest for financial wellbeing.

What Impacts Your Credit?

Your credit score is a number, usually between 300 and 850, that credit bureaus or the FICO will assign you to help lenders easily understand your credit status. It is based on the information found in your credit history report, which is available for free on an annual basis. The higher the number, the better your credit. While each of the credit bureaus determines your score differently, they all will look at a few things. The most important is if you pay your bills on time. Late or missing payments negatively impact your score. They’ll also consider how much of your credit you’re using. If you are maintaining a high balance on your credit cards, that can be an issue. They’ll look at how often you use your credit (better sometimes than never), and they’ll look to see if you have a mix of different kinds of credit. They’ll also check the number of times lenders check your credit because too often indicates a credit risk. Finally, the score is also based on information like bankruptcies or settled accounts.

When Debt Relief Helps

There are different kinds of debt relief programs, some involve you working with a company to negotiate your debts with creditors on your behalf. How they do so will determine if it will help your score. As mentioned, bankruptcies reduce your score, as do debt settlements. That’s when you do not pay your bills and the company negotiates with your creditors only after you haven’t paid in a while. Another option is debt management, where the company representatives will collect your payments and then distribute them as agreed upon with your creditors. This can sometimes result in lower or waived fees. A final option is debt consolidation, in which you receive a loan to pay off your debts. If you work through a debt management or debt consolidation plan, you could find that your credit score will improve as you pay off your debt.

Sometimes Debt Relief Can Hurt, Too

However, if you miss a payment, you may lose what ground you’ve gained by going through the process of your representative negotiating with your creditors or applying for a loan. When you miss a payment on a debt consolidation loan, it will be reported to the credit bureaus. That’s why it’s important to pay as soon as you possibly can and talk with your lender. It’s possible that if you pay when agreed upon it will not be reported. As far as bankruptcy and debt settlement, that’s always an issue with your credit score. While it can help you handle the debt you have currently, these solutions also stay on your credit history sometimes for years.

Thinking Long-Term Helps

There gets to a point when the collection calls and stuffed mailbox of threatening legal letters become overwhelming. It is always a good idea to decide to address your financial problems instead of continuing to just hope it will all go away. Any debt relief solution is better than none, but all of them will require you make substantial changes in your lifestyle to ensure you don’t find yourself in the same position again. Create and follow a personal or family budget and work with a financial professional to help you get and stay on track.

When you’re ready to find long-term debt relief, log on to Refi.com. You may qualify for a mortgage refinance or many other debt relief solutions.