What's the difference between a debt settlement or a pay-off?
I receive a couple collection letters and wanted to know if I should pay the settle or pay the total amount—>>>(on a budget) how would it look on my credit report? any information will help… thanks
Not credit card bills: they are medical, old cable, cell phones…
*credit card up to date and my car note too…
Posted August 5th, 2010 in Debt Settlement. Tagged: budget, cell phones, collection letters, credit card bills, credit report.
Time for another on-line class on dealing with credit.
First, understand that whether you settle or pay off the whole debt, the creditor is only required to show "paid" on your credit report. It does NOT delete the negative information about late payments, charge-off’s and collections.
If you settle instead of paying off the whole debt, they will not this fact on your credit report. Again, it’s another bad sign and will hurt your score.
That’s the bad thing about credit reports…you pay off the debt expecting it to help your credit but in many cases it actually HURT your scores!
So what to do? You need to contact the creditor/collection agent and negotiate a settlement. Part of your agreement must be that they DELETE the information on your credit report once the agreed amount has been paid.
If they refuse to do it, don’t pay. Remember that the purpose of this exercise is to fix your credit. Why pay off your debt if it doesn’t do that?
August 5th, 2010 at 9:34 amit’s a good question. it would save you money by paying the lower settlement amount instead of the total amount, but I don’t know if it would make any difference on you credit rating.
August 5th, 2010 at 9:34 ammy guess is it wont make any difference in the credit rating.
If you pay the total amount in arrears that will catch to up to being current on your loans. You will have to pay on time after you do this in order to keep your credit in decent standing.
Think carefully about your future plans before you do some sort of debt settlement, because it will initially hurt a bit on your credit, but as long as you pay on time and don’t get yourself into more debt you can’t handle, it’s a much better option than bankruptcy or charge off.
August 5th, 2010 at 9:34 amRemember too, with a settlement the amount the credit card company writes off will be considered income to the IRS, so you’ll pay taxes on it at the end of the year.
August 5th, 2010 at 9:34 amIf you settle the debt it will appear as a settlement accepted zero balnce negative credit history. The best thing is to pay the debt off so it reflects paid with late payments.
You can negotiate to settle and have the debt only reflect paid. GET IT IN WRITING!!! If the collection letters are from a collection agency and have not reported it on your credit they may not agree to that since they report to the original creditor.
This is all negotiable. Hard to get somethings but banks now days may need the money more than they care about how negatively they report.
August 5th, 2010 at 9:34 amLook-up the meaning of each word and your answer will be clear,even to you.
August 5th, 2010 at 9:34 amIf these old debts are cell phone, medical and similar debts that normally are not routinely reported to the credit bureaus, you will probably be able to negotiate a delete for payment, even if you pay a lesser amount. The older the debt, the lesser the settlement amount. If these debts are 3+ years old, you should easily be able to settle for half or even less. Lump sum payment gets the best deals. Any payment plan has to be short term. Get any settlement agreement in writing and don’t give them access to your bank account.
August 5th, 2010 at 9:34 am