Creditors may offer or agree to "settle" an account for an amount
less than the current outstanding balance. The settlement amount
must be paid in a lump sum within a certain time frame.
A settlement is not the same as successfully paying off a debt
since the creditor is agreeing to accept a portion of the debt
outstanding instead of requiring you to pay the entire balance
owed. Therefore, settlements may have some negative aspects.
Creditors may report settlements to credit reporting agencies
in a negative manner. Settlements may be reported in one of the
following four ways:
Paid in Full
Settlement Accepted on Account
Settled
Settled and Charge-off of the Unpaid Balance
The first method of reporting, Paid in Full, is the best option
as it will not be reflected as adverse information on your credit
report. The other options, however, could be viewed negatively
by potential credit grantors.
The above information should be understood to be a general
discussion of the subject matter and DOES NOT constitute
a legal opinion about the situation. For further information
please consult a qualified attorney.
