How bad does it look on a credit report to take a settlement rather than pay the bill in full?

Question

Should you pay the whole bill or is it ok to take a settlement? What is the point difference?

Answer 1

Your payments towards the debt account will definitely improve your credit ratings. If you can pay it in full, you will see your credit improving faster.

The status "settled" will put a negative impact in your file. Your future lenders will understand that you had difficulties in paying off the past accounts and arranged a settlement amount with them. Due to this, they might become leery of extending new credit to you.

Be sure that your credit accounts are reported as "paid in full" or "paid" in the file. Don't have them reported as "settled"

Be sure to get an agreement IN WRITING, not over the phone, etc., that says they will report it as "paid in full." If you do not get this in writing before paying, you have no proof if they did in fact report your account as settled.

Answer 2

That depends. If this account has already gone to collections, the damage has been done to your credit. It won't really matter if you settle for less than the amount owed or pay in full. What matters is you will see "account paid" on the credit report. Also, it will not raise your credit score.
If the account is open and you are like waaaaay past due, again - the damage has been done. The negative marks on your report for being late are already there and won't go away for another 7 years. The creditor will usually report to the credit bureau which way you decided to take care of the debt.
In this case, it may be to your benefit to pay in full. If you are ever on the bubble of being denied or approved, that could push you over to the "thumbs up" side. If you're not really concerned about that, I'd say settle.
Hope that helps!

Answer 3

If you can make a settlement, do so. The credit company will report the bill as paid in full. How it occurred is not of interest to most people, if someone ask about it, it is personal and I would decline to answer.

I had to come to settlement with about 4 creditors, to date no one has ever ask me why I did so. That was ELEVEN years ago.

Answer 4

Anything other than the account being gone looks bad. It doesn't matter if it's settled, paid charge off, whatever. A charge off is a charge off. Best thing to do is a "pay for delete". If they won't delete it I would spend my hard earned money elsewhere.