Is it better to settle with creditors or pay in full?
Daniel Santos
Updated on February 18, 2026
It is always better to pay off your debt in full if possible. While settling an account won’t damage your credit as much as not paying at all, a status of “settled” on your credit report is still considered negative.
What has the biggest impact on credit score?
Since payment history is the most important factor in both of the two biggest credit scoring models – FICO Score and VantageScore – then paying your bills on time will have the biggest positive impact on your credit scores. Paying credit card balances in full is also a good idea.
How does a 60 day late payment affect your credit score?
60 days late: Recent 60-day-late payments cause more damage, with greater damage caused if you have a habit of paying late. 90 days late: Payments made this late can damage your credit scores significantly for up to seven years. If you continue to miss your payments beyond 90 days, the following records might also harm your credit score:
What happens to my credit if I dont make payments for 120 days?
Charge-offs: If you fail to make payments on a credit account for 120 days or longer, the creditor may mark the account as charged off. This means they wrote off your debt as a loss. A charge-off is a negative notation on your credit report because it shows you didn’t pay the account as agreed even if you later pay off the debt.
How does paying off a credit card debt affect your credit score?
Because the credit card company takes less money than is owed, your credit score will be temporarily lowered because you won’t pay your debt in full. The amount that your credit score will drop will depend on your personal financial situation. Chances are that your credit score took a dip as soon as you fell behind on your monthly payments.
What happens when you settle a credit card debt?
The process of debt settlement gives you the option to negotiate with credit card issuers to settle debt with a lump sum payment that is less than the total amount due on your account. Note that you may have to pay taxes on the forgiven debt of the settled debt if it’s over $600.
