Settled In Full Vs Paid In Full

Last Updated: Nov 15, 2022

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When trying to pay off debt, overdue bills, or collections included you might feel overwhelmed by the entire process and annoyed by responsibility. When trying to resolve overdue bills or collections you are likely to encounter the terms “Paid in full” and “Settled in Full”. Set out below is the differences between these two closely related terms.

What Does Settled In Full Mean?

If you don’t have the means to pay off a debt in full, you can request a potential debt settlement instead. The term “Settled in full” indicates that a portion of the debt has been paid in order to have the debt considered “paid”.

You will need to establish an agreement with your original creditor or debt collector to pay less than what is owed but still a significant enough portion to consider the debt cleared.  These negotiations can be conducted by you or by credit specialists like Credit Sage.

The “Settled in full” status reflected on your credit report is better than the debt being in default, or unpaid. However, it remains a negative item that indicates the consumer is a risky borrower and will be reflected in your credit score as a consequence.

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What Does Paid In Full Mean?

If your account is “Paid in full” this means the entire principal and any applicable interest has been paid back, absolving you of all financial obligations associated with the account that has been paid in full.

Having a debt that is paid in full is your best option when it comes to your credit score. An account paid in full will have a positive impact on your credit score especially if all the payments were made on time. This is because your payment history makes up 35% of your overall credit score calculation.

You should always aim to have the account paid in full even if it is late or in collections. It will save your credit score falling further.

Bottom Line

Paying off debt is no easy task, especially when you are overextended. Ideally when resolving outstanding debt you should aim to pay it in full but if the circumstances don’t allow for full payment you can negotiate to pay an agreed settlement amount instead. Settled accounts will negatively impact your account, whereas paid in full accounts will have a positive impact.

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