If your credit file is skinny and contained only the three credit card accounts that are going to go bad as part of the debt settlement process, then it will likely take a couple years for your credit to recover (starting from when you get the last settlement out of the way).

The best thing for your credit report would be to settle all 3 credit card accounts before charge off. This would mean negotiating with the banks collection departments, getting the settlement letters, and funding the offers within 6 months (180 days) of delinquency. What if you did not need 50%? Depending on the banks your 3 credit cards are with, you may actually be able to get this done quicker. What if some of your credit card balances could be settled for 40%? What if you settled in month 5 of your late payments and got 3 months to pay the settlement off?

Credit card debt settlement takes longer than 6 months for most people.

The majority of people who choose to settle debts as an alternative to chapter 7 bankruptcy are not able to accumulate the money they need in order to settle all of their credit cards before the accounts charge off. Most often people target one of the credit cards for settlement in the first 180 days and negotiate settlements with their remaining accounts one by one after that.

Settling one credit card at a time is an effective way to avoid bankruptcy. Someone who is trying to limit the impact of settling debts on their credit report, but who must negotiate and fund offers one at a time, will often be looking at an estimated 12 to 24 month credit report recovery time frame. That one to two years starts after the last credit card is settled.

Credit scores are factored using credit utilization.

What you owe as a percentage of credit available is a factored into your credit scores. With the current risk adverse lending environment, creditors are less likely to underwrite new loan products to someone who has a debt to income ratio out of line with their set parameters. This fact is affecting the ability of many people who want to get new credit – even those with a good credit score.

Your projected need for credit in the next 2 years is also important. Are you anticipating purchasing a home, vehicle, or applying for a student loan? If so, what is your timeframe for doing so?

Your best bet to address your credit recovery concern is to settle your accounts within 6 months if you can. If that is not going to happen, you next look to settle 2 out of 3 debts before 180 days. Even knocking down 1 of the 3 credit cards prior to charge off would help.