Debt relief vs. credit repair: Which is better for you?

Debt and credit go hand in hand. So naturally, you may be wondering if debt relief or credit repair is better for you? There are few financial conundrums with a single answer that can suffice for everyone - and the question of whether credit repair or debt relief is better given your unique situation is no exception to that rule. 

While you may think of debt relief and credit repair as one in the same, they're two different services that are designed for two different audiences. So, which is better under your unique circumstances? And, would it be best for you to sign up for both? Find out below. 

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Debt relief vs. credit repair: Which is better for you?

Before you can decide whether debt relief or credit repair would be better for your unique situation, it's important that you understand what these two services entail. Here's an overview of what you can expect from each: 

• Debt relief: Debt relief services focus on getting you out of debt. That may be through the negotiation of your interest rates, your principal balances or both. Debt relief services may also create a payment plan for you and act as an intermediary between you and your lenders. However, the key difference between these services and credit repair is that debt relief focuses on debt. In fact, some forms of debt relief can hurt your credit.  
• Credit repair: Credit repair services aren't typically concerned with your outstanding debts, unless those debts are harming your credit (in which case, they may provide some guidance). Instead, they work to improve your credit score. That process may include disputes with credit reporting agencies, guidance on how to use debt to improve your credit and more. 

So, which is the better option for you? That depends.  

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When debt relief is better

Debt relief is typically the better option when debt is the primary problem. For example, if you're having a hard time making your minimum payments or you regularly miss payments, you may be better served by focusing on paying your debt off first, then work on improving your credit score. 

But, that's not the only time when debt relief may be better. Many people can afford to make their minimum payments, but don't see an end to their high interest debts on the horizon. After all, it can take decades to pay credit card debt off making just minimum payments. If that sounds like you, debt relief may be your better choice - even if you always make your payments on time. 

In some cases, debt relief can help your credit, too. "Taking care of your debt may simultaneously increase your credit score if you pay down credit cards or credit lines below 30%" of the available credit on the account, explains Saundra Curry, co-founder and COO for the financial education company, BC Holdings of TN. 

When credit repair is better

If you're not having a hard time with current debts and you have bad credit as a result of old debts, or you simply don't have credit history "credit repair is more important than debt relief because it enhances your purchase power, opening doors to better financial opportunities and lower interest rates, saving you money in the long run," explains Dutch Mendenhall, CEO of RADD Companies, a conglomerate of financial companies.

In either case, a credit repair service may be able to help. These services may be able to minimize the impact of previous debt mistakes on your credit report. And, if you haven't used debt in the past, they may help guide you through the process of using it to build your credit. 

You may need both

There are some times when debt relief and credit repair services both make sense. For example, if you have debt that you're able to make payments on, but don't expect to pay off anytime soon, a debt relief program makes sense. 

However, in this instance, you may have some past accounts that are reporting negatively or you may be nearing your credit limit - leading to a high credit utilization ratio. In either case, your credit may be in need of repair. 

So, while debt relief helps you put your debt behind you, it may make sense to employ a credit repair service to improve your credit score, too. That way, when you're done with your debt relief program, you may have a reasonable credit score that will open the door to future borrowing opportunities. 

The bottom line

When choosing between debt relief and credit repair, it's important to consider your unique situation. If you're having a hard time dealing with debt, debt relief may be the better option. If your debt is behind you and your credit score is less than perfect, credit repair may be a better fit. But keep in mind that you may benefit from using these services in tandem, too.