Obviously, if you obtain agreement for a PFD, then credit reporting thereafter is deletion, and thus effect is the removal of the derog(s) from scoring.
If you obtain a settlement agreement, then the creditor is required to promptly update their reporting to show a remaining balance of $0, and a current status of paid. The prior delinquency status (e.g., charged-off, or 180+ late) is replaced with a new non-delinquency current status of paid, but the CO continues to be included in your payment history scoring, and thus continues to effect your scoring.
Paying, however, removes the current delinquency status, and thus precludes further updates that continue to extend the effective period of delinquency, permitting the CO to thereafter age in its scoring effect.
If a revolving account, paying also removes the debt from continued scoring under your % util category.
If you obtain a settlement for less, the creditor has the ability to additionally place the special comment reporting of "paid/settled for less" in your file, thus advising others that you did not pay the entire debt that you had obligated. That is always an unfavorable comment in any manual review, as creditors dont expect to lose $ in their lending determinations.
If you negotiate a settlement for less, you can include a provision that they agree not to make any reporting that the debt was paid for less.
If they agree, then your credit report will appear the same as if you had paid in full.
Thus, you might attempt to obtain agreement not to report any reference to settled for less.
