Negotiating your credit card debt can help you get your bills caught up, but if the negotiations involve forgiving a portion of that debt, it may end up hurting rather than helping you when it comes to your credit score. This isn’t true of all negotiations; some types of negotiations can boost your score, as long as you follow through with any agreements you make. What you can negotiate often depends on how far behind you are.

Basics of Debt Forgiveness

Companies may offer debt forgiveness to debtors that are far behind on their credit card payments. The numbers vary significantly, but it’s not unusual for companies to offer debtors the chance to pay 50 percent or less of the actual amount they owe. The company writes off or forgives the rest. Credit card companies and collection agencies may offer this solution when it seems unlikely that they will ever be able to collect the full amount of the debt. Debt forgiveness stops collection calls and letters, but it comes at a price.

The Downside of Debt Forgiveness

Debt forgiveness is not the best solution if you want to try to preserve your credit rating. Typically, when your debt is forgiven the company will mark your account closed by them and will also indicate that it was settled for less than what you owed. You could lose over 100 points from your FICO credit score with a settlement, and the information stays on your credit report for seven years. If the amount forgiven is more than $600, the company must also send both you and the Internal Revenue Service a 1099-C form, and the forgiven amount will count as income to you for the year.

Lowering the Interest Rate

One type of negotiation that can help with your credit score is getting the company to give you a lower interest rate. Often the interest on credit cards is so high that most of your monthly payment goes to interest each month and very little is left to pay down the original debt. A lower interest rate means that more of each payment is applied to the principal amount, allowing you to reduce your debt more quickly without making bigger payments.

Changing Your Payments

Another way to negotiate credit card debt is to change your payment plan to something that works for your current situation. Talk to the credit card company to see if they might agree to lower payments. It’s most helpful if they will also agree to bring your account current so that your payments are doing you some good. If your account remains overdue while you pay, you’re likely to incur extra fees such as late charges and over-limit fees, making it impossible for you to ever get caught up.