If you are considering negotiating a debt settlement, and are concerned about debt settlement's effect on your credit report, then there is a strong likelihood that this debt relief option is not right for you.
Why you ask?
Well, let me first start by saying that entering a debt settlement program (or even settling your own debts) will have an extremely negative impact on both your credit report and your credit score. In fact, part of the whole strategy of debt settlement is to convince your creditors that you are on the verge of bankruptcy and that they may never collect any of the money that you owe them. And since your creditors have access to your credit information, the dire state of your financial situation must be reflected in your credit report and credit score. And that is why I only recommend debt settlement as an alternative to bankruptcy. In fact, since the changes to the bankruptcy laws a few years back (it is now more difficult to declare chapter 7 bankruptcy) debt settlement has become known as the "new bankruptcy".
"In general" debt settlement is only appropriate for folks who are undergoing a financial hardship (divorce, loss of employment, serious illness etc.), that is severely affecting their financial situation. And "in general", it is not appropriate for folks who simply have a significant amount of debt that they wish to get rid of, but are not facing a financial hardship. If you yourself fall into the second category, then chances are that your credit report and credit score are still "decent". On the other hand, if you are unfortunate enough to fall into the first category, then your credit report/score is likely already poor and hence less of a worry.
Which brings us back to your original concern, ie. debt settlement's effect on your credit report. Let's say you have $20,000 in credit card debt, still earn an income, have a fairly clean credit report (no missed payments etc.) and a decent credit score (say 630 or higher). You want to get out of debt, and are considering all of your options, including negotiating a settlement with your creditors. I can tell you that based on those facts alone, you are not a good candidate for debt settlement, and you should be concerned about protecting your credit.
On the other hand, if you had the same $20,000 in credit card debt, but lost your job 8 months ago, were forced to miss several payments, and were considering bankruptcy, then debt settlement just might be your best option. Debt settlement's effect on your credit report is much less of a concern when you are truly in 'financial dire straights'.