A debt that is considered settled in return for a negotiated payment amount less than the actual balance of the debt. In these scenarios, the borrower is already very delinquent on the account. Lenders will generally try to negotiate a settlement amount prior to considering the debt a total loss and selling it to a collection company.
An account that is settled is technically less derogatory than one that was a charge-off. However, both items are seen as negative in the eyes of a potential lender.
