Yes, you can pay the $900, if you so choose. However, if you are having financial difficulties it may be better to save yourself the $400. I never predict the amount of change in points some one will have on their credit report after a certain event has occurred. Credit scores cannot be predicted accurately. There are too many other factors that are involved with credit scores such as what other type of accounts do you have reporting on your credit report, how long you have had those trade-lines, how much credit you are utilizing, and much more.
I do not have information on how a settlement or paying in full impacts your credit scores. However, it would not surprise me if there was not much of a difference between the two and how they impact your credit score. Normally, when an account gets paid off, whether it is settled or paid in full, it tends to be a positive impact on the credit report. In some cases settlements can be reported as settled in full or paid in full. The way you would know if it would show up as such should appear in the paper work the collector sent you with the offer to settle the account at $500.
I recommend that you visit our section discussing understanding your credit score.
If you want to know what your credit score will be after this account has been completely paid you may want to request a copy of your credit report 30-90 days after the account has been paid. That is normally the time it takes to update the credit report after an account has been paid.
I hope this information helps you Find. Learn & Save.