Settling your debt with your credit card issuer for less than what you owe affects your credit score a lot, according to the Kiplinger website. This black mark on your credit remains for seven years.
Effects
Typically, your credit card issuer only settles with you if you are late on your payments. If the credit card company agrees to a settlement, the usual practice is to report the number of days you were delinquent and the amount of the settlement to the credit bureaus, which lowers your score.
Considerations
It is better to settle your debt, however, than to not pay your debt at all. It is also better to settle than to leave your account in a delinquent status, according to Bills.com. When you settle your debt, it generally appears on your credit report as "settled as agreed." This is better than having an unpaid account that you still owe on.
Expert Insight
A tip reported on the MSN Money website suggests that you can ask your credit card company, as part of the settlement, to report your account as "paid in full" rather than "settled" or "settled as agreed." Your credit card issuer may not agree to this, however, because the credit bureaus frown on incorrect reporting.
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