How does a "Settled in Full for less than balance" reported to the credit bureaus affect credit score?

Question

How does a "Settled in Full for less than balance" reported to the credit bureaus affect credit score?

Answer 1

Ok, first things to clear up the matter.

Settlement regardless of the amount it was settled for, the moment you declare that you want settlement, it affects your credit score.

Because the whole concept of doing settlement is to reduce the debt you'd want to pay out...either because you didn't have money...or something else.

Again, settlement doesn't hurt your credit as much as bankruptcy does...so it's not that bad...but again...still bad.

again...

Answer 2

I am going to disagree and I'll be happy to explain.

None of us really know the exact way scores are calculated since it's a trade secret.

All we do know is that scores are based on the following;

1. Pay history  35%

2. Time in bureau  15%

3. Types of credit  10%

4. New credit  10%

5. Debt to credit ratio  30%

Since when accounts are settled they show on bureaus as either R-1 or I-1 depending on weather they are revolving or installment accounts which means they were paid as agreed (pay history) and show a $0 balance, I don't see how this statement can actually hurt your score.

Besides several years ago after the death of my late Wife I settled several accounts for less then was owed and after the dust cleared my score actually went up.

Answer 3

If it is not on there as paid as agreed or some other positive wordage it will be considered a negative, and reported that way, and it will lower your score.

Answer 4

This statement lowers your credit score. The amount depends on a variety of things. Also, the difference is considered taxable income by the IRS.