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This is a complex question. I have a couple dozen defaulted credit cards. In each case I have negotiated for and received letters from the collection agencies stating, "Account is paid as agreed," or "Account was paid in full." In some cases, the collection agencies were not reporting, but agreed to simply report, "Paid as agreed." I also received letters stating this information, which I can send to the bureaus. Under the current U.S. fair-credit law, you have a lot of power to get your credit report straightened out. When you say collection agency, this typically means the card issuer (a bank for example) probably sold off the account in the 3rd market for something like 30 cents on the dollar. The agency then can settle with you for 50% and come out ahead. Be aware, it is possible the original issuer reported a "charge off" or "write off," and the collection agency is reporting the same account as a separate entry. The bottom line is you need to get very familiar with your credit reports from the 3 bureaus. Each may show something different, for example, a creditor may report to one but not another. Whenever you negotiate a settlement, be sure to get that letter. You can then use the letter to update your credit reports directly. I cannot say what impact a settlement has on your credit score. However, I understand the older the debt the less it affects your FICO score. I also read this has become such an issue that a new credit scoring system is being launched in March 2007.

by Blu

3 years ago

Asker's Rating: 

Pay it off in full, or set up a payment plan to pay it in full. Taking a settlement is just telling every other creditor not to trust you when they are considering extending you new credit. Your score is already effected based on the collection existing. You owe it, so pay it. Simple as that. To be clear, once a settlement is offered, accepted and paid, the account is satisfied. The difference cannot be collected or pursued by another agency. Just make sure you get a signed settlement letter.

by Gary N- 3 years ago

Before you settle, is this a student loan or some other loan where you signed a promissory note?? Ask for a copy of it. The collection agency should have it on record and would be glad to provide it. Some companies use many different agencies to collect money, and if one fails to collect, they won't use that one again. The collection agency will still call, though, because now they'll be able to collect cash for free, and you'll still be getting collection calls, even after you paid.

by patience3987- 3 years ago

If you take the settlement offer, they they'll cancel the rest of your debt. You may not be able to get another credit card with them, but then it shouldn't affect your credit rating. If it does, then it won't be much.

by Benny- 3 years ago

keep in mind that settling does not mean the debt is paid in full, it just merely mean that collection agency has settled then in turn might sell the balance to another collection agency who will try to get the balance from you

by dragonfire- 3 years ago