If the card is open, with a balance due, then settling it would mean closing it. That TL will remain on your CR for the next 7 yrs as a bad account. The CCC will update the CL to read as "settled". Unfortunately, FICO reads "settled" accounts the same as a charge-off. That would hurt your score. If you settled at 60%, for example, you would save $2800. You'd have to ask yourself: Is $2800 worth a ding for the next 7 yrs? Would I apply for a new car or home or other loans in the next 7 yrs where the higher interest rates could lead to $2800 or more in additional interest? Only you can answer that.
Also, closing this card could impact your utilization in a negative way if the CL is helping.
If the card is closed, then there is no need to worry about util. It may or may not be helping, but once the account is at $0, then it no longer factors in. Plus you'd have to pay the balance anyway. But going back to the previous example, if you settle, there will be a permanent ding. You'd have to answer as to whether or not it is worth it.
ETA: if closed now, the derog will go away prior to 7 yrs to this point as this card likely went south prior to today.
Message Edited by llecs on 12-02-2008 02:50 PM
