Dear Liz: I need to settle my credit card debt for less than I owe because of a disability and being able to find only part-time work. I am frozen on taking this step because I want to know how many points my credit rating will drop if I do this. There has to be a way to find this out.
Answer: You can’t find out in advance exactly how much your score will drop, but the company that created the FICO score says settling a single credit card debt can drop a 650 score by 45 to 65 points and a 780 score by 105 to 125 points.
Settling a debt can have another consequence: The forgiven debt may be reported as income to the IRS, increasing your tax bill.
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