text: I am a former financial counselor for a consolidation firm in Orlando so I can answer your question. Whenever you get a settlement offer from a collection agency or a creditor, you have to way the pro's and con's of your decisions. Two big factors determine your credit score: 35% is payment history, and 30% is overall debt. Based on these two factors, by making a setlement you're score will increase somewhat because you are satisfying the debt with that creditor, but may not increase as much as if you paid off the entire debt completely. Score may not be your only concern, because future lenders will see the special status of settlement for this debt which lenders frown upon. It's as if you borrowed $100 from a friend and only decided to pay him/her back $60! It satisfies your friend who you owed the money that they got anything back at all, but don't go asking other friends for money, you already have a reputation! \n\nSo in summary, if your financial situation only allows you to pay a settled amount, then by all means pay it. That collector at least will stop calling your house asking for money (PS make sure to get the offer in writing as described above). But remember this, negative credit history can remain on your credit report for a length of 7-10 years. Or your other alternative is to slowly pay off the debt by making smaller payments. If it's with a collection agency, then they probably aren't charging interest and you are already used to their collection tactics. You may be able to pay it off sooner than 7-10 years, and remember they will show "satisfied" on your report instead of "settled" which is much better.