Dear Gil,

I have an outstanding medical bill that a collection agency is calling me about. They have offered a settlement.

How will that be reflected on my credit report and would it adversely effect my credit? I don't want to accept it if will cause me more harm in the future.  Please advise.

D.B.

Hi D.B.,

You are indeed being wise in making sure that this offer by the collection agency is working in your best interest.

Depending on the creditor, the amount of your bill will either be reflected as "Paid", "Settled", or "Settled for less than full balance" on your credit report.  If you are able to negotiate this, try your best to have them state this as simply "Paid".  In the future, it will be the most favorable for you in terms of how other creditors view your credit report.

The other thing I am sure you want to know is how this will affect not just your credit report but your credit score or FICO score, as it is technically referred to.  This again depends on a number of factors.  Most times when people are offered a settlement, it is only because the creditor or collection agency has deemed that the debt is almost uncollectable as it currently stands and they are looking to minimize their losses at this point.  So chances are, the thing that has already hurt your score is delinquincies.  If that is the case then settling on the debt can't really hurt you any further.  Either way, you are going to need time to build your score back up.  If what I am assuming is true, then accept the offer, and make sure to get everything in writing.  Collection agencies are notorious for claiming one thing on the phone and doing another thing, altogether, when you have agreed to them verbally.

I wish you all the best in settling this medical debt.

Gil