General Question

DylanMueller's avatar

If I pay a lump sum settlement will my credit score improve?

Asked by DylanMueller (205 points ) May 17th, 2012

I have an American Express card with a balance of $3300, and in June of 2011 my account was closed for late payment. Following that it went into collections. My credit report now shows this debt as being “charged off”. I’ve just been offered a lump sum payment of $900, and told (in writing) that on my credit score it reflect “paid in full/ $0 Balance”, will this improve my credit score or would it be better just to wait out the 7.5 years for this debt to be wiped from my credit score?

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5 Answers

Judi's avatar

Usually it says “paid in full for less than the full amount.” (or something like that .)
It might look better to some creditors and it might raise your mysterious FICO score by a bit, and it will also extend the amount of time they will be allowed to show it on your credit report. I think it’s 7 years from the last transaction, so if you pay the settlement, it will be seven years from the date you paid it.

DylanMueller's avatar

So would you say I’d be better not paying it at all then?

Judi's avatar

You have to decide. If it were me, and only 1 year out, and I had the means to do it, I would probably go ahead and clear it up.
My first husband ammased some bad debt and they tried to offer me a settlement 20 years later after the statute of limitations was up. Had I paid it, they would have been able to put the debt back on my credit report.

DylanMueller's avatar

Thanks @Judi , I haven’t received the paperwork regarding the settlement agreement. But, do you think it is more then likely going to say “paid in full for less than the full amount.”? Do you think it’s likely that they’ll lie to me on the phone regarding this?

Judi's avatar

I just know that’s what they say when you short sale a house.
I would ask them to clarify the exact language that will be on the credit report in writing.

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