debt settlement

[latecomer]

does debt settlement hurt your credit score?

[RobertEG]

FICO, in general, does not directly score debt payment status.  It scores derogs incurred along the path of the debt. Payment in full,settled for less than the full amount, or even non-payment, dont enter directly into scoring.  However, paid for less than the full amount is recorded in your credit file, and is avaible information to any creditor who later rviews your CR.

Thus, while not a specific FICO scoring factor, it is a possible negative lending decision that a creditor may use if they do a manual review of your CR.

[llecs]

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@latecomer wrote:

does debt settlement hurt your credit score?

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I'd have to say "yes", but it depends on the status now and what is being settled upon. 

If you have a current and open OC account and the creditor agreed for a settlement to close it out, then expect a very significant score ding if a comment of "settled" or "paid for less than full" appears.

If you have an OC account (e.g. loan, CC, LOC, etc.) that is late now with major derogs (90+ days or greater) reporting, and if it updated recently, then the comment could hurt your score as it updates, but the impact will be very minimal since a settled comment hurts almost as much as a charge-off (and is scored on par as a 90+ late or worse).

If you have a collection agency or judgment that you are settling, then there's likely no impact if settled assuming the TL hadn't updated in a long time.

[marty56]

I would also add that if you are not  working directly with the OC, you may wind up in worse shape and possibly even be sued or loose money if you are paying a thrid party to do this for you. 

[zavexx]

I'm sorry, but what is the "HFA Club"?

[guiness56]

High FICO Achievers or FICO High Achievers Club.

Persons with a 760 or above.

[reso]

However if the balance goes to 0 dosent that help the score?