Any time you settle a debt for a reduced amount, your credit could take a hit. Generally, a creditor won’t agree to settle a debt unless you are already late on payments, which means your credit is already impaired. By settling the debt, you can actually help your credit score recover. For most borrowers, the benefits of a debt settlement outweigh the potential harm to their credit. The good news is, if you make good financial decisions after completing your debt settlement, your credit will most likely rebound fairly quickly.