First things first, a settled account affects your credit. However, what you need to know is that it's better than unpaid but worse than paid as agreed.
A credit report maintains records of your loan EMI status & history of credit card dues. It consists of detailed lists of paid monthly dues & loan EMIs on time, before or after the due date. So, when you are done settling your debt with a lump sum payment, your creditor updates the status of the loan as Settled or Paid Settled on your credit history. It is definitely better than an unpaid status update on your credit report, but it is not as good as a paid full status, which would’ve been updated had you paid the full amount. Any status other than the latter can hurt your credit score.
Additional Read: How Long Do Settled Accounts Stay On A Credit Report
In addition to settling your debt, there are other factors that can have an impact on your credit score. But, the degree of the impact of each factor on your credit score varies & cannot be identified accurately.
Debt settlement nevertheless has a noticeable impact on your credit score. When you opt for debt settlement, the account is not removed from your report immediately. If you made late payments while you were paying the loan EMIs, then this account will reflect on your report as a factor for seven years, starting from the first date of late payment.