Collection - Paying in Full OR Settlment

[HM1623]

How will paying a Collection IN FULL vs SETTLING for Less affect my FICO?

[DaveSignal]

I don't think that there is any difference at all.  In fact, I'm not sure that a paid collection scores differently than unpaid.  But as long as you have that account paid and showing a $0 balance owed, it will be easier to goodwill... plus it will stop the CA from updating its reporting.  Try to see if they will delete once it is paid.  Even if not, it is a critical step in rebuilding since it is very hard to get new credit with unpaid collections reporting.

[dddewdrop]

     Paying in full is WAAAAY better than a settlement. It looks way better to prospective lenders..... I have been regretting having settled an account from 2011 for  a long time... ever since. I should have gone on some sort of payment plan or something and paid it off. It ended up being  put on my account as a chargeoff on one report and different ways on others...

[AeroKrix]

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@HM1623 wrote:

How will paying a Collection IN FULL vs SETTLING for Less affect my FICO?

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Always pay in full if you are able to, especially if it's a relatively new listing on your report. PIF can most likely work to your advange in terms of asking for PFD. Some may argue that a settlement can work when an account is close to its SOL, but if that were the case, I'd rather not pay it all, unless, say, your state's SOL is 4 years, but the listing will stay on for a total of 7 1/2 since DoFD. The close it is to SOL (CA's ability to collect, not report), settlement amounts get smaller and smaller, which works in your favor since time is against the CA. But in the end, a settlement notation will be on your report for the remainder of the CRA's SOL. This can cause issues for you when looking for new credit. CA's will be less inclined to agree to a PDF if the debt was settled, rather than PIF.

[Lechte]

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@DaveSignal wrote:

I don't think that there is any difference at all.  In fact, I'm not sure that a paid collection scores differently than unpaid.  But as long as you have that account paid and showing a $0 balance owed, it will be easier to goodwill... plus it will stop the CA from updating its reporting.  Try to see if they will delete once it is paid.  Even if not, it is a critical step in rebuilding since it is very hard to get new credit with unpaid collections reporting.

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+1....OP, if you have the means, I would try for a PFD first so that you'll have some negotiating power.

[AwwwYeee]

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@AeroKrix wrote:

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@HM1623 wrote:

How will paying a Collection IN FULL vs SETTLING for Less affect my FICO?

---

Always pay in full if you are able to, especially if it's a relatively new listing on your report. PIF can most likely work to your advange in terms of asking for PFD. Some may argue that a settlement can work when an account is close to its SOL, but if that were the case, I'd rather not pay it all, unless, say, your state's SOL is 4 years, but the listing will stay on for a total of 7 1/2 since DoFD. The close it is to SOL (CA's ability to collect, not report), settlement amounts get smaller and smaller, which works in your favor since time is against the CA. But in the end, a settlement notation will be on your report for the remainder of the CRA's SOL. This can cause issues for you when looking for new credit. CA's will be less inclined to agree to a PDF if the debt was settled, rather than PIF.

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If your unpaid collection is past the SOL. What does that mean? Why not pay it? Sorry. Still confused about this whole thing hahah

[AwwwYeee]

Bump!

[RobertEG]

Neither expiration of SOL nor credit report exclusion of the collection are basis for not paying the debt.

Unless the debt is discharged, it still exists.

Expiration of SOL avoids a court order to pay, and credit report exclusion shields others from becoming aware of the unpaid debt by seeing a collection continuing to report with no showing of paid.

A simple reqest in any app for new credit for disclosure of any unpad delinquent debt will make the creditor aware separate and apart from credit report review.

Other than $ out of pocket, it is always beneficial to have no unpaid delinquent debt.

As for settlement for less, if agreement is reached not to report settled/paid for less to the CRA, it will appear to one reviewing your CR the same as if the debt had been paid in full.  Absent a PFD, the next best thing is a settlement for less with agreement not to make that optional reporting.  New creditors are not going to ask the terms of satisfaction of prior debts showing paid, $0 balance.