May
29
AC
If I owe a creditor $2,500 and they offer me a settlement of $1,500 and I take it and pay the $1,500. Does that hurt my credit and FICO score because I settled and didn’t pay back the full amount?
If I owe a creditor $2,500 and they offer me a settlement of $1,500 and I take it and pay the $1,500. Does that hurt my credit and FICO score because I settled and didn’t pay back the full amount?
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3 Responses to “How does making a settlement with a creditor affect my credit/FICO score?”
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It will show on your report as Paid in full for less than owed or something like that, and impact your credit negatively
It doesn’t make a difference… your credit score wont improve…it will just stay the same…
Whether you settle or not really won’t improve your score. The fact that the account went to collections means that the information from the original lender showing as charged off has already damaged the score.
The one thing about settling is that the amount you didn’t pay is treated as income and must be taxed. You may receive a 1099 form from the creditor about this. What you might want to do is ask the creditor to accept a Pay for Delete agreement. This is where the collection agency agrees to delete the collection account from all credit bureaus if you pay in full. If you are going to do this then make sure this is in writing, sent via certified, return receipt requested mail.