Debt Settled vs Paid in Full
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  1. #1
    Join Date
    Jul 2011
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    11

    Debt Settled vs Paid in Full

    I am trying to settle a debt of about $4800 for $2700. I am told my credit report will read "settled" not "paid in full".

    Is there a big advantage of having "paid in full" vs "settled"? does it increase my credit score? Should I make payments to get a "paid in full".

    Thank you in advance for your responses


  2. #2
    Join Date
    Jan 2008
    Location
    Seattle, WA
    Posts
    3,597

    Re: Debt Settled vs Paid in Full

    The difference will have a huge effect on your credit score. "Settled" is inherently a negative mark and will continue to hurt your credit scores, while "Paid in Full" isn't considered a negative entry on your credit reports. If possible, you want to avoid a "settled" notation altogehter and either have the debt removed or updated to paid in full. Make sure this is part of your negotiation process with the CA.

  3. #3
    Join Date
    Aug 2010
    Posts
    117

    Re: Debt Settled vs Paid in Full

    Quote Originally Posted by JoshuaHeckathorn View Post
    The difference will have a huge effect on your credit score. "Settled" is inherently a negative mark and will continue to hurt your credit scores, while "Paid in Full" isn't considered a negative entry on your credit reports. If possible, you want to avoid a "settled" notation altogehter and either have the debt removed or updated to paid in full. Make sure this is part of your negotiation process with the CA.
    Let's not kid ourselves here. If the creditor is willing to consider settlement, then the debt must be at least 90-days late and/or be charged off. If so, then the serious delinquency and/or charge-off has already damaged your credit rating, and paying it off--even in full--won't increase your credit score, or improve lenders' willingness to extend credit significantly.

    The only benefit to paying off the debt is that you don't have to worry about a possible lawsuit in the future. Other than that, there is really no benefit to paying anything, and time is the only thing that can heal your credit.

    So if you can settle for $2700, and you can afford to pay this amount, then go for it. I can guarantee you that the difference between a paid-in-full collection (or paid-in-full charge-off) and one that is settled is so small that you'd have to be out of your mind to waste $2100 just to get the "paid-in-full" notation. That being said, if the creditor is willing to settle for $2700, odds are they'd be willing to settle for less. Try to negotiate it down to 40% (i.e. you pay $1920) and make sure to get the agreement in writing that the debt is settled in full and will not be re-sold to any other collection agency ever again.

  4. #4
    Join Date
    Jan 2008
    Location
    Seattle, WA
    Posts
    3,597

    Re: Debt Settled vs Paid in Full

    Quote Originally Posted by BCOHEN2010 View Post
    Let's not kid ourselves here. If the creditor is willing to consider settlement, then the debt must be at least 90-days late and/or be charged off. If so, then the serious delinquency and/or charge-off has already damaged your credit rating, and paying it off--even in full--won't increase your credit score, or improve lenders' willingness to extend credit significantly.

    The only benefit to paying off the debt is that you don't have to worry about a possible lawsuit in the future. Other than that, there is really no benefit to paying anything, and time is the only thing that can heal your credit.

    So if you can settle for $2700, and you can afford to pay this amount, then go for it. I can guarantee you that the difference between a paid-in-full collection (or paid-in-full charge-off) and one that is settled is so small that you'd have to be out of your mind to waste $2100 just to get the "paid-in-full" notation. That being said, if the creditor is willing to settle for $2700, odds are they'd be willing to settle for less. Try to negotiate it down to 40% (i.e. you pay $1920) and make sure to get the agreement in writing that the debt is settled in full and will not be re-sold to any other collection agency ever again.
    I didn't say to go for a "Paid-in-full" collection or "Paid-in-full" charge-off. Yes, those will be just as damaging to the OP's FICO scores as if they were unpaid. My point was it can't hurt to aim high for a complete removal or an agreement to update to "Paid in Full" in return for payment.

  5. #5
    Join Date
    Jul 2011
    Posts
    11

    Re: Debt Settled vs Paid in Full

    I spoke with the collection agency and they told me that it is against the law for them to mar as "paid in full" unless it is paid in full.

    If I settle their only option is to mark it as "settled". Is this correct?

  6. #6
    Join Date
    Aug 2010
    Posts
    117

    Re: Debt Settled vs Paid in Full

    Quote Originally Posted by mikepink View Post
    I spoke with the collection agency and they told me that it is against the law for them to mar as &quo