PIF or Settle?

[Anonymous]

I spent 30 minutes going through the site to find this answer since I figured it was common but to no luck. I know lots of factors come into credit decisions but is their a big difference on my report and score between paying in full and taking a settlement offer? I want to pay in full since I obviously owe and thats only fair but taking settlements will help me pay more things off. 

[RobertEG]

Either way, the basic reporting on the account will end up the same.

Any account where the debt has been satisfied will have the same current status of Paid and, of course, debt balance of $0.

Currrent account status does not record how you and the creditor arrived at their acceptance of the debt as satisfied, and thus Paid.  Satisfied = Paid.

The essential difference is that when an account is satisfied for less than the full balance due on the debt, the creditor reports an additional Special Comment code, which states "Settled/paid for less than the full amount."  That comment advises all who do a manual review of your CR that, in the past, you accrued debt that was not fully paid back to the creditor.  The degree to which that might affect their lending decisions is up to them.

Some on the site have stated that presence of that Special Comment of paid for less is taken into account in FICO scoring in some manner.  I cant speak directly to whether FICO scoring is affected by that comment.  Maybe others will post a definitive answer.

[drkaje]

If you can get a PFD, things change a lot. Paying less than the full amount sill negatively impacts your score.

I'd try researching the company involved and see how others have had success.

[RobertEG]

I would not necessarily accept as gospel that a pay for less affects your score.  I have never seen any direct statement from Fair Isaac to the effect.

I, personally, see no reason why private negotiations between a creditor and a consumer should affect one''s score on a satisfied debt, particularly since the amount of any settlement is not recorded in a consumer's credit file.  Was it 99% or 10%?  Huge, and unreported, difference.....

[MarineVietVet]

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@RobertEG wrote:

Either way, the basic reporting on the account will end up the same.

Any account where the debt has been satisfied will have the same current status of Paid and, of course, debt balance of $0.

Currrent account status does not record how you and the creditor arrived at their acceptance of the debt as satisfied, and thus Paid.  Satisfied = Paid.

The essential difference is that when an account is satisfied for less than the full balance due on the debt, the creditor reports an additional Special Comment code, which states "Settled/paid for less than the full amount."  That comment advises all who do a manual review of your CR that, in the past, you accrued debt that was not fully paid back to the creditor.  The degree to which that might affect their lending decisions is up to them.

Some on the site have stated that presence of that Special Comment of paid for less is taken into account in FICO scoring in some manner.  I cant speak directly to whether FICO scoring is affected by that comment.  Maybe others will post a definitive answer.

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I would be one of the "some". Any notation of "settled" is scored the same as a charge off. This information comes directly from the administrator of this site. Is that enough of an authority?