Other articles by Todd Ossenfort:

The Credit Guy: A cash advance to pay for wedding is costlyThe Credit Guy: Transferring debts to someone else requires his cooperation, good creditThe Credit Guy: Putting sister on credit card leaves its primary holder holding the bagThe Credit Guy: Changes to credit-card laws call for consumer vigilanceThe Credit Guy: Discipline is first step in a card-repayment planThe Credit Guy: Make offer, then it's up to collection agencyThe Credit Guy: Settling on card debt could settle your hashThe Credit Guy: First thing — let creditors know you're joblessThe Credit Guy: Rest easy about Social Security, card debtsThe Credit Guy: Company credit-card bill adds insult to injury

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Q I owe $20,000 on my credit cards. I've had some companies tell me they could reduce this amount by as much 60 percent. Can you tell me a good company to deal with?

A Paying a percentage of what you owe rather than the full amount is called a debt settlement. There are many different companies offering debt settlement services today. Some are more reputable than others. When you settle a debt for less than is owed, your credit history will take a severe beating. If you are already more than 90 days late in making payments on your credit cards — which I hope you're not — then going the debt settlement route will probably not cause your credit score to get much worse.

However, if you are current on your accounts now, settling your debt will make your credit history much, much worse. The reason is because creditors are only willing to settle a debt for less than the full amount owed when they believe collecting part of the debt is better than collecting nothing at all.

When you are current with payments, creditors have no reason to believe they will not be able to collect the full amount, and they are unlikely to consider settling your account.

Debt settlement companies generally collect a monthly amount from you that you can afford to pay, in addition to an initial enrollment fee. Rather than dispersing your payments to your creditors, they hold onto the payments for at least three to six months, depending on your circumstances.

Next, they try and negotiate with your creditors on your behalf to settle the account. Keep in mind, you are making monthly payments to the settlement company, but nothing is being paid to your creditors, and you will still be receiving the collection calls from the people you owe.

Making no payments to your creditors is reported to the credit bureaus, and your credit score will tumble quickly. Once the creditor has agreed to a settlement amount and your account is settled, that will also be reported to the credit bureaus. Although the account will be marked paid, it will be not be marked paid-as-agreed, which is how you want any account that has a negative listing to be resolved.

Potential creditors viewing your report will see by looking at settled accounts on your credit history that you did not make good on your original agreement with your creditors. I don't know of many creditors who are actively seeking customers who don't pay as agreed — especially during the current tight credit market.

I know it is tempting to get out from under the $20,000 as quickly as possible. You will need to weigh the negative consequences to your credit history against the consequences of trying to pay out what you owe over a longer period of time. Only you can decide which is the best course for you, but I would stay away from debt settlement if at all possible.

Some words of advice if you do choose to settle your debt — make sure you choose a company that:

● Is accredited by the Association of Settlement Companies (tascsite.org).

● Has certified debt arbitrators.

● Has reasonable fees (shop around).

● Has a service guarantee.

● Discloses what is included in your debt settlement program, including fees.

● Is a member of the Better Business Bureau or area Chamber of Commerce.

● Is licensed and bonded in your state, if so required.

Take care of your credit!