When you receive a settlement offer from a collections agency, does it benefit your credit rating to pay it?

Answer 1

Not unless you request deletion upon payment.

A paid negative is still a negative.

When you pay, they cannot legally re-age the account to make it run for longer than the original reporting period
If you pay it without requesting deletion, it will actually hurt your credit by updating the account (updating is not re-aging) and that will make it look newer than it actually is

Never speak to collectors on the phone, always do everything in writing.
Never sign your name to your letters, only print your initials or type your name in.
Always send everything to them certified mail return receipt.

You can always request that they remove the trade line upon payment. They make deals like that every day.

Before talking payment with them, you should send a validation request.
Find out if the amount they are claiming is the true amount, that they are licensed and/or bonded in your state if your state requires it, if you are still within the collecting SOL or past it and that they have a legal right to collect on that debt.

Look over your reports for any violations they are reporting.
After you receive the green card back from you validation request, send a dispute to the CRA's for the violations.

After they have provided proper validation, then you might start talking payment.
If you are out of the collecting SOL you are not bound to pay and have every right to notify them that the account is non collectible.

If it is past the collecting SOL and you do want to pay, you can negotiate the amount down quite a bit since your offer to pay is the only legal way they would be getting any money for that account.

If it is still within the collecting SOL, you can still negotiate to pay a lesser amount as payment in full.

And always demand that they sign an agreement that your payment will be considered payment in full and that they will delete their trade line from your reports.

If they send you a signed agreement, be sure to save that letter in a safe place, just in case they do sell the remainder of the account to another collection agency.

You might click on my profile and do some reading in the links I've provided - for the FDCPA, FCRA, etc. There is also a link to find the collecting SOL for your state.

Answer 2

It's noted on your credit report that the account was settled for less than the amount owed.