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AMCa

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Debt settlement, payment, and the long game on credit repair
After escaping my 20s with significant debt, I recently (finally!) started to make some good money. Paid off my credit cards, which resulted in an almost-immediate 20pt jump in my credit score. Now trying to figure out what the best next steps are.

Unfortunately for a few years I had very little money and fell behind on four student loan accounts. They are all marked as charge-offs on my credit reports now and I've been offered settlements on all of them. I now could theoretically pay them in full... not sure if that's a waste of money at this point though, as from what I've read, the difference on a credit report between a settlement and payment in full is almost negligible.

For a little more background, in case it's relevant: I don't expect to be applying for a mortgage or loan or lease for at least a year, likely more. Potentially much more, but ideally I'd like to have the flexibility to do so within 1-2 years. Since I did maintain a good payment history on other student loans and credit cards, my score isn't in shambles, despite the charge-offs: 716. Charge-offs due to come off my reports about 2020.

I can see several courses of action:
1) Pay in full, then wait for things to fall off and/or utilize a credit repair service
2) Settle, then wait for things to fall off and/or utilize a credit repair service
3) Use the offer of full payment as leverage for deletion and/or 'paid as agreed'

Not knowing much about much, this third option seems like it's got the most potential, but if I go that route I'd need help with it (that high-paying career now comes with crazy hours so I don't have significant time to really devote to it myself). From what I've been able to discern from my reading, regular credit repair services seem like they generally get involved after the fact, not really in the midst of negotiating payments. I've also found this to be true after conversations with two companies, though two data points is of course not necessarily significant.

These forums seem to be filled with generous and knowledgeable folks, so I'm hoping one or two of you might have some advice. I guess my questions come down to this:
1) is it worth pursuing option 3 above in some capacity? (If not, how about 1 or 2? Or something else?)
2) if 3, is there a particular type of person/company that I should be looking for who would be willing to take that process on? (And is qualified to do so / effective with results / etc. / etc.)

Many thanks in advance.

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avoid credit repair svc if you can.

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As far as "Credit repair services" go, it is true that "they can only do for you,  only what you can do for yourself".  They will usually charge around $100 a month for a minimum  contract to write a letter or two and mail them for you. Some offer services where you make a monthly payment to them and they will forward payments for you.  They will charge you a fee per check as well as their monthly contract.  The reality is that it is to their benifit to drag out your debt repayment as long as possible to keep you as a customer as long as possible.  I've also seen someone end up oweing more to Credit repair services than the actual debt was to begin with, So I'm not to enthusiastic about anyone using them. In my book,  those fees and charges that you would pay to a credit repair service would better serve you being paid towards your debt. 

If you are able to, there is no harm in trying to negotriate a settlement, a pay to delete or any other tact that you might want to try, but do so in writting, never by phone. Be sure to address letters to the "collections manager" (the only one that can actually negotiate)  Be prepared to make the payment as soon as possible because they often limit the time the offer will be on the table.   

Read up on more of the articles and blog posts here on CK and gain a better understanding of how credit works as a whole and how to manage it well,  take the steps needed to clean up your own credit report.  Your credit score is the most important number in your financial life, One that stays with your forever.  It will not only effect your interest rates and credit limits on credit cards and loans, but things like insurance rates and even in some situations weather you get "the Job" or not.

I hope I didn't make things even more confusing.

Good luck

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I would never suggest trying a "pay for delete" scheme. Collection agencies depend on the credit bureaus for their business, therefore they don't want to do anything to harm this business relationship. The bureaus forbid the practice of pay to delete if the information was accurate. If a collection agency does it anyway, they risk having their agreement with the bureaus terminated. It still happens, but generally speaking it won't work so odds are it's probably a huge waste of your time to try.
As for credit repair agencies, don't waste your money. Many of them are a scam, promising huge increases in your score, which they achieve by disputing every derogatory mark. The marks are removed temporarily while the bureaus investigate the dispute, your score goes up, and then in a couple weeks when the investigation is over and the credit repair company has been paid guess what--your score is right back where it started. The ones that aren't a scam aren't doing anything you can't do yourself.

You mentioned paying in full or settling with your collections accounts. I would suggest settling, because it still makes it a "closed" collection, which is the important thing. There will be a remark on the account along the lines of "Paid for less than full balance," but that's no biggie. The difference to your SCORE is negligible when it comes to open vs closed collections, but the difference in your REPORT is huge. If you anticipate any housing changes in the next seven years, you may want to seriously consider trying to work out a settlement deal, because you won't get a mortgage with an open collection and most property managers won't work with you either. Open collections probably make it more difficult to get just about any new line of credit. 

FICO 9, although not widely used yet, does make a significant distinction between open and closed collections. This model does not count paid collections against your score. Will FICO 9 be widely used within the next seven years? Who knows--but if it is then that would be another reason to settle your collections. 

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