Paying vs. settling a collection

How "paid in full" and "settled" look on your report, how scores treat them, and how to protect yourself.

Paid in full vs. settled

Paying the full balance usually updates the account to "paid." Settling for less usually shows "settled for less than the full balance." Either way, the collection can stay for seven years from the original date of first delinquency.

How scores treat it

Newer scores, such as FICO 9 and 10 and VantageScore 3.0 and 4.0, ignore paid collections. Older FICO versions, still common with mortgage lenders, may not. Paying can still matter to a lender reviewing your file.

Get it in writing first

Before you pay, get the agreement in writing: the amount, that it resolves the debt, and how it will be reported. Pay in a way you can track, and keep every record.

Taxes and old debts

If $600 or more is forgiven in a settlement, you may receive a 1099-C, and the forgiven amount may count as income. On very old debts, check your state’s statute of limitations before paying.