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by Jesse Campbell on October 13, 2015

Paid in Full versus Paid Off Less than Full Balance

Ask the Experts: What's the difference between Paid in Full and Paid Off Less than Full Balance?

I have a Walmart store credit card that went into collections for $225. Recently the collections agency sent a letter saying I could pay $139 and it'll say Paid Off Less than Full Balance. Or I can pay off the full amount and it will be reported as Paid in Full. Would I still be able to pay off the card inside a Walmart location? So it says paid without the collections? Or what is my best option for this scenario? – Yvonne


I can’t speak to whether or not you’ll be able to pay the debt at a Walmart location. Some companies maintain their own collections department, but most usually sell these types of debts to a third party collection agency. Once you’ve decided how to proceed, you should call the number included in the letter and they should be able to provide your repayment options.

It’s important to note, though, that whichever amount you decide to pay, the fact that the account was sent to collections will not be erased from your credit report. Any negative marks resulting from missed payments or an account charge off will remain on your credit report for seven years. Paying at the store or through the collection agency doesn’t make a difference in that regard.

Whether or not the account was paid in full, however, does make a difference. Most credit scoring models do take this distinction into account when calculating scores.

Paying off an account in full is almost always better for your credit score. How much it ultimately affects your score really depends on the rest of your credit history.

Also, it should be noted that if you agree to a less than full balance payoff the creditor may report this to the IRS, and as a result you may be required to claim that forgiven debt as income on your next tax return. If you’re considering a credit card settlement and aren’t sure how the forgiven debt may impact your tax return, please consult with a tax professional.

Settle Card or Payoff in Full?

As for which is your best option, that’s ultimately up to you. If you’re concerned about your credit score because you know you may need to take out a loan in the near future, paying in full puts you in a better position going forward. If your credit is already suffering and money is tight, the settlement is an acceptable option. Just make sure you get the agreement in writing before making any payment.

Good luck!

Got a question? Submit your question to Ask the Experts and the answer could be featured here in Blogging for Change! 


Anderson says:
October 30, 2015

I was thinking about take the settlement of two of my close accounts after reading this, I have decision to pay off these account bit by bit till I pay the full balance. Thank you.

Anonymous says:
April 14, 2016

I have an account that was turned into collections simply due to a divorce and multiple changes of address. I have made contact with the agency and have set up a payment plan. Since this occurred as a result of divorce can I dispute it or have I already hurt myself by committing? All I want right now is to put my credit in great standing again, is there another approach to correct this

kathy says:
October 15, 2015

I have been paying off an account bit by bit and when I was offered a settlement, I was dithering a bit but still leaning towards paying in full not the settlement account; after reading this, it made me realize that for me this was a better option. thank you

Lisa Haley says:
November 20, 2016

Hi, We (my husband & I) have accumulated debt in the past 10 years. I hear different stories from different people about how to get out of it smartly. We have changed our lifestyle completely & try to save as much as we can. We sold our house (to pay off some of the debt) & are renting now. Would like to buy a house but our credit score doesn't let us. We are making good money now and we know we can for sure pay the mortgage on time. Owe IRS & have a payment plan with them. I have the following questions. If you can be kind enough to give us some professional advice we would be great full forever. 1. Is there anything which would delete any debt? 2. Is settling the account better/worse than paying in full? 3. How do we improve our credit score? 4. Is there any person/company I can go to get advice about it? 5. Please give us your suggestions Thank you very much Lisa Sent from my iPad

Suzanne Salisbury says:
July 15, 2016

Hello, I settled a few collections accounts 7 years ago but they still show on my credit report. How do I get them removed? Does it hurt my credit to ask the companies to remove them?

Taralyn Rose says:
January 07, 2016

Once the item is paid, whether it is settled or paid in full, it will impact your score less and less as each month passes. Yes, it stays on for 7 years, but won't really affect your score after 2 years of it being handled. You can also try requesting that the collection company Settle and Delete Derogatory Item by writing a certified letter and asking that they delete the item once they receive the agreed upon amount. It doesn't hurt to ask, and if they DO delete the item, it stops affecting your score immediately.

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