Let's say to get a CA off your back, you settle and pay $1200 on an old $3000 debt. 2 years passes, it drops from your CRs, and you rejoice. Then you get served with a summons and complaint. You get sued. Why? Well, for that $1800 you still owe, plus another $4179.83 in penalties, fees, interest, etc. Can they do that? Well, after checking, the SOL in your state is 4 years, you paid $1200 2 years ago, so yep they can sue you. The $4179.83 may or may not be able to get tacked on, but if they can prove the $1800 debt they can collect on it. If they win, and get a judgment, that judgment will get reported, and you have a bad TL on your CRs all over again--perhaps for another 7 years after it's paid.
Hat's off to Noah for a very informative post. It's true that hard pull inquiries have no effect on your FICO after 1 year, as I understand it. But they may still hurt you for lending purposes according to the lender's own inhouse formula which nobody is privy to.
I have 7 hardpulls on Equifax that are 14 months old. For some reason, Equifax has never missed a single pull in my history. Experian has caught less than half of them and TransUnion doesn't have a clue about any of them. Go figure that.
Still, I'm pretty sure a lender would look with askance on those 7 pulls as I was in a credit acquisition phase. I was prepared to bite the bullet for 24 months to clear them off my credit reports in exchange for some quick trade lines.
But I doubt very much this wouldn't affect my ability to qualify for the best rates on some loans even with a relatively good FICO score--times being what they are in the financial markets.
If you do a settlement or a PFD on a debt make sure you get the settlement or PFD in writing. THey can not sell the difference. It is only if you make a partial payment on the debt without a formal settlement or PFD and then don't pay the balance.