Site Loader

If you are here, you are probably looking for options or information on how to deal with an account that is either past due or in collections. You are not alone, it is estimated that 68 million people have one or more accounts in collections or charged-off status. Charged-off accounts can still be sold to a debt buyer or an outside collection agency. Trying to get your finances in order after a job loss, death of a family member, medical issues or any other life events can be stressful. Especially when it comes to moving on and dealing with any accounts that may have fallen into collection status. Navigating what to do or how to do it can be daunting. 

This article will go into detail about: 

  • What is the difference between collection accounts being paid and full and settled for less? 
  • A few recommendations from a friend who has been in your shoes on what to do if you plan on making a large financial purchase in the near future. 

Difference Between Paid in Full and Settled for Less

The biggest difference between paying in full and settling for less is pretty simple and sounds rather self-explanatory. When negotiating with creditors, if it is the original creditor they may not accept anything other than the full amount owed. However, once your account gets sold to a debt buyer, then maybe you will be able to settle it for less. Settling for less means that you pay a lower amount than what you originally owed, and then the collection activity normally ends once you can reach an agreement with the collection agency or creditor. 

Should I Pay My Full Balance, or Try to Settle it for Less?

You may be trying to figure out whether or not you should pay your collection account in full, or try to settle it for less. That question really depends on your financial situation and what long-term financial goals you have. Are you looking to make a major purchase such as a car or a home in the next few years?

If so, you may want to consider paying the balance in full if it will not create a financial hardship or drain your emergency savings. One thing to note, if you are looking to purchase a house in the next few years, I would highly recommend reaching out to a loan officer or mortgage company to find out what their specific recommendations are regarding qualification criteria and negative items on your credit report. Not all lenders are created equal, each lender has its own guidelines on what is and is not considered risky behavior. Reaching out for a consultation with one of these companies may help give you a clearer idea of what you should do. 

A few things to note if you choose to settle your account for less than what you originally owed: 

  • When negotiating on settling your account, do not provide any payment to the creditor or collection agency until you have received a written agreement from them stating the payment agreement and arrangement. This will help protect you in the event that they try to sue you. You will have the agreement in writing and it may help you win the suit. 
  • Having a settled account on your credit report may not look as favorable to lenders over a collection account that reflects a paid in full status. Again, this depends on the lender, but it is still good to be mindful of. 

The Collection Account on My Credit is 6 Years Old, Should I Pay it?

A general rule of thumb on deciding whether or not to pay a collection account off is to pay attention to the age of the account. Negative items on your credit report such as late payments, charge-offs, collections, repossessions, and some bankruptcies fall off 7 years from the date of a first missed payment. Paying off older collection accounts may actually cause your credit score to drop. 

One other thing to note about paying off an old account or settling it for less is that any communication with a debt collector could result in the statute of limitations being re-activated, and by reaching out to try to settle or inquire about the account it could be grounds for the creditor to sue you. If you are unsure about what the statute of limitations is for debt in your state, you can reach out to your State’s Attorney General’s Office and they can provide you with that information. 

If you are trying to make a large purchase in the next year or two and you have a collection account that is near aging off your credit report, it may be in your best interest to wait for it to fall off of your report before moving forward with your purchase. 

My Records Show That My First Missed Payment for an Account in Collections was 9 Years Ago, but my Credit Report Shows It Was 5 Years Ago. What do I do?

If you have a collection account on your credit report and you have the original information for it, and you spot errors, under Fair Debt Collection Practices Act (FDCPA), you have a right to a fair and accurate credit report. You may dispute the inaccurate information, just make sure that you provide the proof of your dispute. If you suspect that the original creditor or collection agency may be altering the dates to keep the account on your credit report you can report the creditor or collection agency to your State’s Attorney General’s Office, or file a complaint with Federal Trade Commission. Account Re-aging is a serious offense and violation of the Fair Debt Collection Practices Act. Keeping an accurate record of your accounts and regularly monitoring your credit report can help prevent this from happening. 


While being hounded by debt collectors can be daunting and overwhelming you do have rights and protections. Trying to navigate through repairing your credit and moving on from a life event can be difficult. Asking the right questions and documenting everything is the best way to protect yourself and set you up for financial success in the future. Having account(s) in collections is not the end of the world. As I mentioned before, approximately 68 million people have one or more accounts in a collection or charge-off status.  
If you are feeling overwhelmed and feeling like you are running out of options, please Contact Us and we can help you work through your situation and provide you with free information on how to manage your collection accounts and if needed get you to an attorney are debt settlement company that can help you throughout the process.

Post Author: Ascend

Group of guest writers and industry experts who have specific expertise in Chapter 13 bankruptcy, Chapter 7 bankruptcy, debt relief, debt settlement, and debt payoff.

Leave a Reply

Your email address will not be published. Required fields are marked *