Do Settlements Hurt Credit Scores?

John, does having the statement “Settled for less than full balance” affect your FICO score?

Answer,That’s what’s referred to as a “narrative code.” It’s text that accompanies the account on your credit report and provides additional details about the account. That particular narrative code, obviously, goes on an account when it has been settled. And yes, it is considered negative by the FICO credit scoring system. How negative depends on what else is on your credit report. If that’s the only negative item on your credit reports then it’s having a profound negative impact. If, however, it’s one of many negative items then the impact is much less.