When delinquent, how much worse is it to settle than to pay off a debt in full?

I have many debts from CCs to a car to personal loans. On 2 CCs, I just lost track after having moved, changed jobs, etc. They went to collections just as I was going to try to make arrangements. I understand that settling shows up on the credit report as settled, but it's tempting to do when it can save me so much, and I can start to get the debt in the past. How much worse would it make things for me in the long run if I settle vs. knock the interest down and pay off the amount in full? Will it significantly affect my ability to buy a car, rent an apt, buy a house, get a CC, etc, any more than if I paid in full? The collectors are calling. What's the best answer? I want to be on top of my finances again. I'm not used to having a delinquency problem. It's not me. I want out of debt and to build my retirement, especially when I'm already 34 and have all debt and no real assets or equity after being married to someone who sucks me dry financially.

I am really surprised at the wrong information that was given to you here. It is not true that paying off the account will allow it to be removed from the credit report any faster than if it is settled. The opposite is actually true in many cases. Negative information is kept on the credit report for seven years from the start of the last delinquency. If you catch up at one point and then get behind again, this will start the clock over. If you settle the debt, then there is no restarting of the clock.

It is also not true that a settlement will necessarily keep you from getting credit for years. Most loans are based strictly on your credit score. There is no appreciable difference in the credit score of someone who paid off a debt in full and someone who settles the debt as long as they happen at the same time. Much more important is how long ago the delinquency was. If you have to wait to pay it off, it will have far more impact on your credit score.

The money that you save by settling the account can be used to help you financially now and to help you rebuild your credit. Further, you can negotiate how the company reports the debt to the credit bureau in your settlement offer. You can have them just report a zero balance and not report that it was even settled. I have done this for many clients.

It would probably be better to consolidate and pay off the debt rather than settle. The settlement can stay on your record for 7 to 10 years, but once you pay the amount in full, the debt can be removed from your record in 6 months or less.

You shouldn't settle unless you have no other choice.

The delinquencies will remain on your credit report regardless of whether you pay in full now or settle now; you're already in delinquent status and no matter what you do now, that's going to take a while to repair. But settling will do a LOT more damage to your credit at this point than paying it off, even if it takes you a lot longer to do. The money you save now by settling will be taken away by many years of higher interest rates and with a settlement on your credit report, you will have a hard time getting a car note, mortgage, etc in the next 5-10 years.

I suggest you to pay off all debts in full.