When a person takes out a credit card -- essentially, a line of credit with a financial institution -- he runs the risk of taking on more debt than he can pay back. In this situation, the person may turn to a number of debt counseling and relief programs. While consulting these programs will not lower a person's credit score, negotiating an alternative payment plan or a reduction for money owed can.
Credit Counseling
When a person's debt becomes unmanageable, he may receive credit counseling, usually from a private organization. However, in some cases, the debtor may attempt to speak directly to the credit card company about possible payment alternatives. In neither case will the person's credit score be affected by simply requesting credit counseling or inquiring about assistance paying the debt. However, if the person takes action based on this advice, his score may decline.
Debt Consolidation
One of the main solutions to unmanageable debt is debt consolidation. Under debt consolidation, a lender purchases the person's debt -- either a single debt or multiple debts -- and issues the debtor a new loan, one that allows them to pay in smaller installments over a longer period. Debt consolidation will generally not harm a person's credit score as the person pays off his credit card debts.
Debt Reduction
In some cases, the debtor may negotiate a reduction in the total amount of money he owes. He will either do this by negotiating directly with the credit card company or through an intermediary. In either case, if he receives a reduction, the credit card company will likely report to credit reporting agencies that it wrote off part of the debt. Anytime a debt is written off, the debtor's credit score will fall, with the severity depending on the amount of money written off.
Considerations
If a person negotiates a settlement with a credit card company that requires him to pay less than the amount he originally owed on the account, the credit card company does not absolutely have to report this debt to credit reporting bureaus as written off. If the company chooses, it can legally report the debt as paid in full. As a condition of negotiations, some debtors require that, despite receiving a reduction, the credit card company report the debt as paid in full.
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