Debt settlement. How does it hurt my credit score?
I had a debt in charged off as bad debt in 2009. I was never contacted by these companies or the debt company (PRA) so when I checked my credit score report I noticed this debt of 1,300.
I am settling with them for 0. They say that they cannot delete the debt from the credit score and it will be shown as settled less than full.
How bad does that hurt my credit score in the short and long run?
Is it better that I settled?
- When a credit card defaults (called a "charge off"), the damage to your credit has been done and it cannot be undone by later paying back the debt. A charge off stays on your credit report for 7 years from the original date of default, even if you pay the debt back in full. At best, your credit report would be updated to Paid/Settled R9 Charge Off status with a $0 balance, still bad but a little bit better. It is for this reason that you might as well get the best/lowest settlement you can get.
December 25th, 2011 at 7:02 pm- Paying/settling this debt now will have little or not effect on your credit score….$650 is really not a good settlement (50%) on a 3 year old charge off….This is a lot of money to pay and still have bad credit anyway. $400 would be a better settlement being that you’ll have bad credit. Be sure to get all terms of this settlement in writing first, to include a letter on their letterhead confirming the terms….Once you get this, it’s safe to pay. Don’t give them your bank account #’s.
- If by PRA you mean Portfolio Recovery Associates…then be super careful when dealing with them. This is one of the worst collection agencies in the nation. You cannot deal in "good faith" with debt collectors and you have to assume that any promise that is not backed up in writing is a lie.
paid settled account is better then un paid
December 25th, 2011 at 7:02 pmBy the way, when PRA settles, the other $650 (the part you didn’t pay) will be reported to the IRS as taxable income to you in 2009.
December 25th, 2011 at 7:02 pm