How Does Fico 9 Treat Settled Charge-offs?

[Brian_Earl_Spilner]

Any paid collections are, for the most part, removed from scoring. Obviously, it would have to be reported to the bureaus as paid in full or paid as agreed, otherwise it will still show a balance. My understanding is that any unpaid collections hit you harder than on fico8.

[Anonymous]

Brian is right.  The key question for our OP is therefore:

If I settle the collection, will it say Paid In Full or Paid As Agreed?

And I am personally skeptical that it will read that way.  Though I admit to having little experience with collections.

[Anonymous]

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@Anonymous wrote:

Brian is right.  The key question for our OP is therefore:

If I settle the collection, will it say Paid In Full or Paid As Agreed?

And I am personally skeptical that it will read that way.  Though I admit to having little experience with collections.

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Thanks for the reply! Upon looking at a settled account on my CR, it will say, "Account Settle for Less Than Full Balance" and "Paid As Agreed."

[Anonymous]

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@Brian_Earl_Spilner wrote:

Any paid collections are, for the most part, removed from scoring. Obviously, it would have to be reported to the bureaus as paid in full or paid as agreed, otherwise it will still show a balance. My understanding is that any unpaid collections hit you harder than on fico8.

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Thanks for the reply, Brian!

My settled accounts show as "Paid As Agreed," so I should be fine. 

[RobertEG]

Any acceptance by a creditor of an amount as satisfaction of the debt results in a current status of either paid, if the account is closed, or pays as agreed, if the account remains open.  Settlements for less are legally paid or return the account to a pays as agreed, non-delinquency status, and the debt balance is updated to $0.

However, if a creditor accepts less than the full amount of a debt as settlment of the debt, they are also permitted to report the additional special comment of paid for less.  That informs others that the consumer did not pay the full debt that they obligated, and is never a favorable comment upon any manual review, but the current status is still the same.

You can, as part of any settlement negotiation, include the agreement of the creditor not to report any reference to the debt having been settled for less that its full amount.  If they accept, your credit report will then appear the same as if the debt had been paid in full.

[Brian_Earl_Spilner]

Robert is correct, I was half asleep when I posted. Any charge off or closure of debt will show $0. The comments are for future applications of credit.