If you had a chance to settle an old credit card debt for about 42 percent less than what you owe, would you jump at the chance?

I know many people would.

But Donna Maria Coles Johnson wasn't sure whether she should settle. She wanted my opinion.

Her story is typical of many credit card borrowers. She had charged $19,000 on a credit card she used for a new business. Her husband lost his job. She tried to make the monthly minimum payments, but fell behind. With interest and penalties, the debt escalated to $24,000. The debt was charged off by the lender and sold to a debt collector. The company contacted her recently and offered to settle for $14,000.

"While that is a tempting offer and I can pay it, I have heard that paying less than the full balance can negatively affect your credit score, while paying the full balance — even though late — affects your score positively," the Maryland woman wrote. "I am now in a position to pay the entire amount due but I would love to save the $10,000. We plan to buy a home in 2007 or 2008, and I would like to do whatever will help me get a lower interest home loan when the time comes."

Before I answered Johnson's basic question of settle or pay in full, I set her straight about the misconceptions she had about the impact on her credit score.

It is true that when you agree to pay less than the full balance on an old debt, it can impact your credit score negatively, according to Evan Hendricks, author of "Credit Scores and Credit Reports: How The System Really Works, What You Can Do."

It can hurt your score if the collection agency changes the date of last activity on the account, inadvertently making it appear as if the debt is new, Hendricks said.

Most bad debts can stay on your credit report for seven years. However, a recent late payment does far more damage to your credit history than an old debt now in the hands of a collection agency. For example, a 30-day late payment from last month is going to reduce your score significantly more than a judgment from six years ago, Hendricks says in his book.

The seven-year period starts with the last date of activity. If you pay off or settle an old debt, a debt collector may report to the credit bureaus new activity on the account. That, in turn, might appear as if you have a recent delinquency. The credit-scoring models put more emphasis on recent delinquencies, which bring down your score.

"The thing is to get in writing a guarantee that they will continue to report the accurate age or date of the old delinquency," Hendricks said.

In fact, be sure to get copies of all three of your credit reports and check the last date of activity on the account to make sure the collector sticks to the agreement.

Hendricks said Johnson is also wrong that paying the debt in full will positively impact her credit score. The problem is once you become seriously delinquent on an account, the damage is done.

Paying the debt in full doesn't necessarily put you in a better position with a mortgage lender either.

"From a mortgage perspective, as long as the debt was paid, whether it was for the full amount or under an agreement, is all that matters," said Deenice Galloway, a mortgage loan specialist in Bowie, Md.

In evaluating mortgage applicants, lenders just want to see that the debt was resolved in some way, Galloway said.

So in Johnson's case — as far as her credit score was concerned — she could either pay the debt in full or accept the offer without either action impacting her credit score.

"I want to do the right thing either way," Johnson said. "I want to be able to sleep at night."

Then pay all of what you owe, I said.

After we corresponded, she called the debt collector and paid the debt in full.

I know lots of folks would say she's a fool. That she should take the offer and keep her $10,000.

But that's just it. It's not her $10,000. That money rightfully belongs to her creditor.

"I'm a fool for having let it spin out of control in the first place," Johnson said. "If I pay less than I owe, even if the creditor accepts that, I would not really be debt-free. I want to be truly debt-free. That means on paper and in my soul."