If you watch the ads on TV that talk about debt settlement you would think it is a great strategy for anyone with more than $10,000 in credit card debt. But it’s not. It is a more aggressive approach to getting out of debt. For some people it is the right debt relief strategy. For others, it can lead to a lot of headaches.

How do you know if debt settlement is right for you? Here are 3 important truths about debt settlement, which will help you decide:

1) You MUST be behind in your payments.
If you are behind in your payments then debt settlement is often a good strategy. If not, then you must stop paying. And if you want to keep your clean credit history, then not paying will damage it. So debt settlement is less about how much you owe, and more about how bad your financial situation is at the moment. And this fact is surprising to many people, who follow the advice of a debt settlement counselor without really understanding how it will impact them. After all, why would a bank give you a discount of 40-60% if you are paying your bills on time? They won’t, of course. So you need to stop paying to get them to listen to your settlement offer.

2) It WILL hurt your credit score
Sure, most companies will tell you that they’ll ask the creditor to list your debt as paid in full and your credit history will remain perfect. Sorry but that won’t happen. The creditor does not care about your credit. They just want your money. And once they get it, they’ll report it to the credit bureaus exactly as it happened – paid in full for less than the full balance. One the one hand, having less debt does help your credit. But first your late payments will hurt your credit. Then paying off your balance for less than you owe will hurt it once again. Now, if you are desperately behind in your payments then you may not care. But for the average person who thinks settlement is some miracle way of getting off easy, understand that there is more to the story than some of these companies tell you.

3) These days many banks WON’T talk to settlement companies (so you will need to do it yourself).
With the right knowledge and the right tools, you can do most things on your own. Debt settlement is no different. It doesn’t take an advanced college degree to settle your own debts, but you do need to know how the process works. And you do need to know the little “tips and tricks” it takes to get the best deal. So, if you decide to settle your own debts, get yourself a book or manual that describes how to get out of debt and learn how to do it right. Learning as you go along can be costly.

So there you have it. Debt settlement can be an effective debt relief plan, under the right conditions. But it is not the easy way to get out of paying half of what you owe, despite what you hear from many unethical debt settlement companies.