If you discharge a debt either by payment if full or by a settlement for less, the current status is paid, and the creditor or debt collector must update the current balance to $0.
If they accept a settlement for less that discharges the debt, they have the option of additionally reporting that includes the special comment of paid/settled for less. Either Paid of Paid/settled for less is a non-delinquency status that ends the total period of delinquency, and thus thereafter permits the collection or CO to begin to age in scoring impact.
However, if they choose to include the special comment of settled for less, that informs others that you have a history of not paying the entire debt that you obligated. That is viewable by prospective future creditors, and is never a favorable comment upon a manual review.
It can effect their willingness to grant new credit, and is something that you should try to avoid.
You, can, as part of negotiation of any settlement on a debt, include the provision that they agree not to report any mention of settled for less to any CRAs. If they agree to that provision, it becomes a binding part of your payment contract, and your credit report will then only show paid, making it look the same as if you had paid the debt in full.
If you did not obtain agreement not to report settled for less in your settlement negotiations before paying the debt, you can still pursue good-will requests asking for change in status to show only paid, thus omitting any reference to settled for less.
