Pay Less Than Owed on Debt can Damage Your Credit Score
Let’s say you already have a past due on your report and you want to get the debt off your back, so you agree to pay for 75 percent of the debt.
That actually hurts your Credit Score because the balance that’s left for what you don’t pay will be reported as a new charge-off on your credit report and will hurt your credit rebuilding efforts.
You can prevent this when you negotiate with the debt holder, but if you fail to do so, most will report the charge off.
The debt will be settled, but the impact on your credit report will persist. It does seem counter intuitive, to be punished after paying, but that’s how it works.