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Does Freedom Debt Relief Affect Your Credit Score?
July 1, 2025
Quick Answers
Engaging in debt settlement typically requires halting payments to creditors, which will cause a temporary but significant drop in your credit score due to reported delinquencies.
Your credit score can begin to recover as debts are successfully negotiated and settled, gradually rebuilding your payment history.
Settled accounts are noted on your credit report as "paid settled," which is less favorable than "paid in full" but better than an outstanding delinquency.
What Is Freedom Debt Relief?
Freedom Debt Relief is a company that specializes in debt settlement for consumers with significant unsecured debt. The company's primary service involves negotiating with creditors on a client's behalf to reduce the total amount owed. This process serves as an alternative to other financial strategies such as credit counseling or bankruptcy.
Under their program, clients stop making payments to creditors and instead deposit monthly payments into a dedicated savings account. This period of non-payment to original creditors will negatively impact a client's credit score. Once enough funds are saved, Freedom Debt Relief uses the money to pay off the newly negotiated settlements.
How Freedom Debt Relief May Affect Your Credit Score
Enrolling in a debt settlement program like Freedom Debt Relief can significantly impact your credit score, as the process involves stopping payments to creditors while funds accumulate for settlement offers.
- Initial Payment Halt: The process generally requires you to stop direct payments to your creditors. These missed payments are reported to credit bureaus, which can lower your score as payment history is a primary factor.
- Account Delinquency: Continued non-payment leads to accounts becoming delinquent. Creditors may charge-off the debt or send it to collections, both of which are significant negative events on your credit report.
- Settlement Reporting: When a debt is settled for less than the full balance, your credit report will reflect this. The account is typically marked as "settled" or "paid settled," which is viewed less favorably than an account paid in full.
- Path to Recovery: Once the program is complete, your credit score can begin to recover. The negative marks will remain for up to seven years, but their impact lessens over time as you build a new, positive payment history.
How Much Will Freedom Debt Relief Affect Your Credit Score?
Enrolling in a debt settlement program like Freedom Debt Relief can impact your credit score in several ways. Here are the key factors to consider:
- Initial Credit Score Drop: Your score will likely decrease when you begin the program. This is because you stop paying creditors directly, which can result in missed payments being reported to credit bureaus.
- Settled Accounts Notation: When a debt is settled, your credit report will show it as "settled for less than the full amount." This is less damaging than an unpaid debt but is still a negative mark.
- Long-Term Recovery: Your score can improve over time as debts are resolved and you establish a new, positive payment history. However, negative marks from settlement typically stay on your report for seven years.
How You Can Avoid Freedom Debt Relief Affecting Your Credit Score
Maintain Consistent Program Payments
Making timely payments into your dedicated program account is crucial. This is the money used for negotiations with your creditors. Missing payments can delay the process, prolonging the period of negative credit reporting and potentially causing the settlement plan to fail entirely.
Understand the Initial Credit Impact
Be prepared for an initial drop in your credit score. The debt settlement process requires you to stop paying creditors directly, which results in delinquencies. Understanding this is an expected, temporary phase can help you manage expectations as you work toward becoming debt-free.
Monitor Your Credit Report
Regularly check your credit reports from all three major bureaus. This allows you to verify that settled accounts are being reported correctly as "paid-in-full" or "settled for less than the full amount." Disputing any inaccuracies promptly is key to your credit's recovery.
Choose the Right Card to Freedom Debt Relief
No matter your starting point, improving your credit score is an achievable goal that can unlock better financial opportunities. According to an expert guide, consistent, positive financial habits can lead to meaningful changes in as little as three to six months.
- Monitor your credit reports. Regularly check your reports from all three major bureaus—Experian, TransUnion, and Equifax—to identify and dispute any inaccuracies that could be hurting your score.
- Establish automatic bill payments. Since payment history is the most significant factor in your score, setting up automatic payments ensures you never miss a due date.
- Reduce your credit utilization ratio. Aim to keep your credit card balances below 30% of your total available credit to show lenders you aren't overextended.
- Become an authorized user. Being added to a credit card account with a long, positive payment history can help improve your own score by association.
- Diversify your credit mix. Lenders prefer to see a healthy mix of credit types, such as revolving credit (credit cards) and installment loans (auto or personal loans).
- Limit hard inquiries. Avoid applying for too many new credit accounts in a short period, as each application can cause a temporary dip in your score.
The Bottom Line
Engaging with Freedom Debt Relief can help resolve your debts, but the settlement process itself, which requires you to stop paying creditors, will almost certainly lower your credit score significantly.
Frequently Asked Questions
How does Freedom Debt Relief affect my credit score?
Your credit score will likely decrease initially. This is because the program requires you to stop paying creditors, resulting in missed payments and defaults being reported.
How long will the negative impact last?
Negative marks from late payments and settled accounts can stay on your credit report for up to seven years from the date of the first delinquency.
Can I rebuild my credit after the program?
Yes. Once your debts are settled, you can begin rebuilding your credit by opening new, secured credit lines and making consistent, on-time payments to establish positive history.
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