TransUnion: Debt settlement enrollment triggers steeper credit score drops than bankruptcy filings
TRU•TransUnion analysis on debt settlement and bankruptcy
- TransUnion analysis found third-party debt settlement enrollment can drive larger credit score drops than bankruptcy for distressed consumers.
- Median VantageScore 4.0 fell 96 points for current borrowers, to 549 six months post-enrollment from 645 six months pre-enrollment.
- Bankruptcy filers saw a 20-point median decline over the same span, to 562 from 582.
- Nearly half of debt settlement enrollees were current on obligations at entry, raising lender risk of missed early distress signals.
- Adding trended credit attributes to bankruptcy-risk signals lifted identification, capturing an additional 25% of enrollees in the highest-risk 10%.
