 TITLE: Is It Better to Pay Off Debt or Settle It? CONTENT: Is Paying Off or Settling Debt Better for Your Credit?\n------------------------------------------------------\nIn general, paying off the total amount of debt you owe is a better option for your credit. An account that appears as \"paid in full\" on your credit report shows potential lenders that you have fulfilled your obligations as agreed, and that you paid the creditor the full amount due.\nAccounts remain on your credit report for up to 10 years when they're closed in good standing (meaning no late payments). Positive payment history on those accounts—the most important factor in your credit score—will continue to strengthen your score during that time. The growing length of your credit history can also have a positive impact on your score.\nYou can pay less than the full amount owed if you negotiate with a lender to settle the debt. Debt settlement companies offer the option to settle debt on your behalf for a fee, but there are many drawbacks to this process, including shattered credit and high fees. Instead, negotiating with lenders on your own—or considering a debt management plan organized through a nonprofit credit counseling agency—may be better options.\nNo matter how you settle debt, anytime you don't repay the full amount owed, it will have a negative effect on credit scores. The \"settled\" status will remain on your credit report for seven years from the original delinquency date of the account. If the account was never paid late, the \"settled\" notation will stay on your report for seven years from the date the debt was settled.\nIt's important to know that if the account was in collections, and you either paid it off or settled it, your credit score won't necessarily improve right away. The collection account will stay on your credit report for seven years, and older FICO® Score☉ models factor this notation into your score even if the balance on the account is zero. END