The damage to your credit almost certainly won't be as bad as a bankruptcy, but there will still be some damage. Typically if the creditor takes less than what is fully due in satisfaction of the debt they will still note your credit file as settled or compromised. It hurts your credit score, but not as much as a bankruptcy would.
The foregoing is commentary regarding a general legal question. It is not intended to be legal advice specific to the reader's individual situation nor does it create an attorney-client relationship between the author and any reader. You are encouraged to contact a qualified attorney to discuss your legal situation.
I won't speculate about how various actions affect credit scores. But debt settlement companies often charge very high fees and leave you exposed to lawsuits for a long time.
Unless you have enough disposable income that you can be disciplined enough to put money away for lump sum settlements (between 30 to 60%), debt settlement won't work. Further, in order to get these deals, you need to be in default - as in stop paying. Once you do that, you put yourself in the firing line for debt collectors and lawsuits for the debt. You have no idea when you will be sued or how many creditors will sue you at the same time. Is it worth a judgment on your credit if you can't settle with the creditors to avoid a judgment? Think about the worst case scenario and then visit a bankruptcy attorney - learn the facts, not hypotheticals. As for your credit, how soon will you need it? Credit damage from bankruptcy heals quicker than you think. Besides, after bankruptcy you're a better credit risk - you can't file again for 8 years and you don't owe anybody a penny when you're done with bankruptcy - that means you get to keep the cash your spending on your credit cards right now.
If you do choose the debt settlement route, please research carefully.
While I am the Student Loan Lawyer, the information I provide is not legal advice nor is there an attorney client relationship created. If you would like more information about me or my firm, please visit my website - www.TheStudentLoanLawyer.com.