Settlement of the debt will achieve two things.
While not immediately improving FICO score, it will prevent possible further damage by a judgment, and will update your CR to show the debt is now satisfied.
First, it will avoid a trial. Unless you can show that the SOL has expired, a trial will result in presentation of evidence by both sides, and unless you can prove the debt is not legit, they will get a judgment. That is a major derog.
Second, whether paid in full or in part, the debt balance will be updated to $0, which is very important on any manual review of your CR. Any showing of unpaid, delinquent debt can be a show-stopper regardless of FICO score.
The one additional thing I would attempt to secure from them is an agreement not to report the additional special comment of paid for less, which they are entitled to do if satisfaction of the debt is based on their acceptance of less than the full amount. The acct will then show on your CR the same as if paid in full, which avoids informaing others reviewing your CR that, in the past, you did not fully pay all debt that you incurred.
