• Debt settlement companies negotiate your settlement with your creditor.photo checkbox credit image by Aleksandar Radovanovic from Fotolia.com
  
  If you are at least three months behind on your credit card payments, owe a large sum or have maxed out your credit cards, then you may qualify for a debt settlement program. There are third-party companies that offer debt reduction programs, and some creditors may provide the service directly. There are many positives to a debt settlement, especially if you are falling behind on your bills.
  
  

A Reduced Amount Owed

• The biggest aspect to a debt settlement is the reduction of your total amount owed. According to MSN Money, you could pay 20 to 75 percent of the amount you owe to the creditor, provided you make a one-time payment. This can mean substantial savings if you have a large balance on the account. If you have only a limited amount to spend to repay the debt, a settlement could also mean the difference between paying the account and having it charged off by your creditor.
  
  

Quicker Debt Resolution

• If you have been paying the minimum amount due on your credit card, it could take several years before you pay off the account. By opting for a debt settlement, you will be able to pay the account off much quicker, possibly in as little as two months. This will have a positive effect on your cash flow--once you pay the bill and eliminate the monthly payment, you will have a surplus in your budget.
  
  

Closer to Improving Your Credit Rating

• When you pay a debt settlement, the credit will begin reporting your account as "settled." While this is not an ideal situation, a settled account looks better on your credit report then a delinquent account. The balance on the account will also begin to show as zero, which may lower the overall credit balance reported on your credit score. However, if you are current on your payments to the creditor when you accept the debt settlement, the change in account status may actually lower your credit rating.