What is a "Settlement" on a Credit Report?

Question

A few years ago I purchased a total lemon car from a local dealership. The car was falling apart left and right. I couldn't afford to be making endless repairs to the car in addition to my car payments, so I decided to surrender it because it was more of a problem that it was worth.

So of course, I got a "repo" on my credit report because of it, as well as an unpaid remaining balance. One day I got a call from an agency who bought my account from the original finance company, and they offered me a "deal." They said if I agreed to make monthly payments on the balance, they would significantly lower the balance for me (from like $8000 to $3000) and that it would be written off as a settlement on my credit report after I've paid off the balance.

Now that I'm only a few months away from paying that balance off, I'm wondering if it was even worth it in the first place. I don't know what a settlement is or what it's regarded as on a credit report.
Could someone enlighten me? Thanks!

Answer 1

It will read as follows; "Settled for less than full balance" But, it will show a $0 balance. Nobody will know how much less than the full balance you paid, just that you did. It looks a whole lot better than a reposession.

Answer 2

A 'settlement' statement on your credit report basically says 'paid but not the full amount owed'. In my opinion it is not worth it. Something similar happened to me but I wasnt told that it wold reflect as 'settlement' on my CR. I have since settled other accounts and I always demand a letter stating that the account will be paid in full upon receipt of agrred payment BEFORE I send them anything. Please keep your paperwork and receipts because you may see it again on your CR. Good luck!

Answer 3

paid less than full balance but the lender has agreed to this as final payment.