If you settle a chargeoff or collection does this increase your credit score?

Answer 1

A settlement has less of a positive effect on your credit that a payment in full does. A full payment will give you the maximum boost in score that you can receive.

In addition to the differences in score, you have to realize all of your future creditors see that you settled accounts instead of paying them in full. They will know that you have a history of not taking full responsibility for you finances and they have to decide if you're worth the monetary risk.

Personally, I wouldn't settle.

Answer 2

It could take years to raise your credit score even after you pay the amount. The nest thing for you to do is to write (don't call) the collection agency that is handling your account and tell them that you will pay the amount only if they agree to take the chargeoff off from your credit report. When they reply in writing that they agree to do so then you can go ahead and pay it. if they say they will not do it then tell him that you are going to file bankruptcy cause you are late on your mortgage too. The collection agency won't know you are lieing..they may suspect it but, they won't know for sure. Anyway, give that a shot.

Answer 3

Actually, I have found it to be basically a "wash." Theoretically, paying off the negative item should increase your score but settling should lower it. I consider it to be a breakeven though I have never seen any evidence that settling actually lowers your score.

Answer 4

Yes. To creditors, any collection activity on a credit report means that you don't pay your bills, and are a risk. Also, even zero balances on an open account signify to the creditor that you have the potential to rack up a balance on that account and overextend yourself...also making you a credit risk.

Answer 5

No, but it will stop having a negative affect on it and will help you to be able to qualify for new credit so you can re-build your credit history.