Last reviewed: 30 September 2026

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Credit repair vs. debt settlement vs. debt consolidation

These get marketed almost interchangeably, especially in ads. They solve three genuinely different problems.

Credit repair

Disputes items on your credit report — it doesn't change how much you owe. See what credit repair actually is for the full mechanism. Governed primarily by CROA.

Debt settlement

Negotiates with your creditors to accept less than the full amount you owe, usually after you stop making payments and instead pay into a dedicated savings account the settlement company draws from. This can genuinely reduce what you owe, but it typically tanks your credit score further in the short term (since it requires missed payments to work), can trigger a tax bill on the forgiven debt, and carries real risk of being sued by a creditor before a settlement is reached. Governed primarily by the FTC's Telemarketing Sales Rule Advance Fee Rule when sold by phone. For the month-by-month mechanism, see what to expect from debt settlement.

Debt consolidation

Combines multiple debts into a single new loan or balance-transfer product, ideally at a lower interest rate — it doesn't reduce what you owe, and it doesn't touch your credit report's existing history. This is a lending product, not a repair or negotiation service, and it has its own separate standard — see How we check. The Register counts six debt consolidation loan companies among those assessed so far, and none of them is on the public passing list. How one works is covered in debt consolidation loans, explained.

Correction, 30 September 2026: an earlier version of this section said debt consolidation is the one of the three products that we "don't currently vet company-by-company on this site." That was wrong. Debt consolidation loans have their own published standard, and the Register counts six debt consolidation loan companies among those assessed, none of which is on the public passing list. We replaced the sentence with that description.

A nonprofit alternative worth knowing

A debt management plan (DMP) through an NFCC- or FCAA-accredited nonprofit credit counseling agency is a fourth option, distinct from all three above: the agency negotiates lower interest rates (not a reduced balance) with your existing creditors and you repay the full debt over a structured plan, usually 3–5 years. It doesn't damage your credit the way settlement does, and legitimate agencies are funded mainly by creditor contributions rather than large consumer fees. The full mechanism is in nonprofit credit counseling and debt management plans, explained.