I believe that if an agreement is reached before going to court also the situation shouldn't reach the credit report because the debt has been already settled. I've read that even debt settlements are bad for the credit.
Corporate / Incorporation Lawyer
What will not reach the credit report is a public record (the judgment), which is of course highly negative. Public records also appear on investigative reports (like those sold by Lexis/Nexis) essentially forever, and such reports are available to *anyone*, not just credit grantors and others who have a permissible purpose to see your credit reports. Also, public records also appear on the websites operated by the clerk of court in your area, and on myflorida.com.
What *will* reach your credit report (unless you negotiate for it not to appear, or to appear differently) is a "settled" notation on the tradeline with respect to that creditor. The other possible notations would be "paid in full" (the best possible at this juncture) or "paid". The creditors also have the power to remove lates. None of these will be freely granted, you will have to negotiate for them.
According to www.myfico.com, "Credit reporting agencies also collect public record information from state and county courts, and information on overdue debt from collection agencies. Public record information includes bankruptcies, foreclosures, suits, wage attachments, liens and judgments." However, this info is not one of the 5 factors in determining your FICO score.
As Mr. Hankins said, you can negotiate what is reported to the credit bureaus. If you have a written settlement agreement and they report something contrary to your agreement, you may be able to pursue a claim for violation of the Fair Credit Reporting Act.
Unfortanately you are incorrect. Compliance with the terms of the financing is what determines what is reported to a CRA. If a settlement occurs they may have to accurately report the debt status..BUT it may still show as an R9 or I9 (way past due) because it wasn't paid properly.
Divorce / Separation Lawyer
Oftentimes a recent paid collection account can do more damage to your credit than an old unpaid collection account. Because many credit scoring algorithms are proprietary in nature, it would take an expert, like Evan Hendricks, to tell you how much variance there might be in the respective score. When you settle a debt, you can insist on language in the settlement that addresses reporting or nonreporting of debts with the credit bureaus. An example might be: Debt Collector further agrees (a) not to issue a Form 1099-C to Good Consumer due to the nature of the dispute or for alleged discharge of indebtedness based on the nature of the dispute, (b) request the deletion of its trade line to the three major credit bureaus, Equifax, Experian and Trans Union and any other credit bureau if notice is given to debt collector that the trade line is being reported and (c) to request the deletion of any non-account review inquiries from debt collector or its affiliate by written request to the three major credit bureaus, Equifax, Experian and Trans Union and any other credit bureau if notice is given to debt collector that such credit bureau is showing a hard inquiry from debt collector or its affiliates. Debt collector will furnish to Good Consumer a copy of the Automated Universal Data ("AUD") form submitted to the referenced credit bureaus requesting deletion. Debt collector in no way guarantees the conduct of the credit bureaus. I wish you the best in the future.
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