topic Re: Impact of settled in full? in Understanding FICO® Scoring

Impact of settled in full?

AutumnC74 — Fri, 04 May 2012 02:43:50 GMT

13 months ago in had no idea what I was doing and under threat of an imaginary lawsuit, I settled a charged off account with a collection agency. I recently paid the settled amount which was $1296 less than the charged off amount. When this updates to the CRA the remarks will be, "settled in full" and the balances will be zero and show as closed. Currently I have the charged off account and the collections accounts reporting. Both will show a zero balance. What are the likely implications re credit scores???

Re: Impact of settled in full?

RobertEG — Fri, 04 May 2012 03:13:20 GMT

The codes work like this...

When the debt is satisfied, the current status in your credit file reads one word. Paid. It is the same, regardless of the amount the creditor accepted as satisfaction of the debt.

There is no code that reads "Paid in full." And of course, current balance will read $0.

If the consumer settles for less than the full amount of the debt, a separate Special Comment can, and usually is, reported that reflects the debt was paid/satisfied for less than the full amount due. So paid in full is inferred by absence of the special comment "paid/settled for less."

If a debt is settled for less, it is always a good idea to try to obtain agreement that the special comment wont be reported. If not reported, the account will read to all reviewing your CR the same as if the debt was settled for the full amount.

Some feel that the special comment is actually scored by FICO. Regardless, it is definately not a special comment that is helpful upon a manual review of your CR.

Re: Impact of settled in full?

AutumnC74 — Fri, 04 May 2012 03:15:24 GMT

When this updated info hits, will it lower my score?

Re: Impact of settled in full?

llecs — Fri, 04 May 2012 03:34:48 GMT

FICO scores a settled comment on par as a CO. If the CO continually updated, then one day updated with a settled comment, then you wouldn't see any FICO change on the comment alone. However, there's always a chance to see a small bump as another account hits $0 as the number of TLs not reporting a balance increase and you stand to see a nice gain if the TL was a CC, assuming that CC negatively impacted util.

Re: Impact of settled in full?

AutumnC74 — Fri, 04 May 2012 03:41:15 GMT

It was citifinancial... The collection account doesn't show up as a collection account but It two accounts showing Up with different amounts being owed. Maybe with both showing up as zero it will help?

Re: Impact of settled in full?

AutumnC74 — Fri, 04 May 2012 03:44:36 GMT

I am so confused and so upset that this person called me out of the blue and threatened legal action. I settled under duress and the threat of lawsuit and being told I had to agree to settle right then and there or get sued. It is a horrible and sad situation.

Re: Impact of settled in full?

Tikon — Fri, 04 May 2012 16:12:53 GMT

AutumnC74 wrote:
I am so confused and so upset that this person called me out of the blue and threatened legal action. I settled under duress and the threat of lawsuit and being told I had to agree to settle right then and there or get sued. It is a horrible and sad situation.

How is it a horrible and sad situation? They have a right to inform you of the consequences (lawsuit) of not paying and they have a right to attempt to collect a debt that you did in fact owe.

Re: Impact of settled in full?

drkaje — Fri, 04 May 2012 17:01:49 GMT

@ Tikon,

I think most people are under the impression that paying or setteling will give them a clean start.

Re: Impact of settled in full?

llecs — Fri, 04 May 2012 17:45:25 GMT

Also, by law, if a collector says they are going to sue, then they have to sue. They aren't allowed to make empty threats. I didn't look at the balance paid (if posted) and money is always relative, but If I owed $15,000 as an example, and they offered to settle for $5000, then I'd rush and jump at the offer, duress or no duress.

Re: Impact of settled in full?

AutumnC74 — Fri, 04 May 2012 21:32:02 GMT

I was informed that I was going to be sued if I did not give them an answer before I got off the phone by a COLLECTION AGENT WHO HAD NO RIGHT TO DO SO, I was not given anything in writing, I was lied to and told this was the best thing for me at the time and if I did not agree to the terms (NONE OF WHICH WERE PAYING THE FULL AMOUNT OWED - ONLY SETTLING - WHICH HAS TAX IMPLICATIONS as well as the ability to totally devastate your credit) I would suffer horrible consequences.

I had been working with their settlement people and had made a payment the DAY BEFORE I received this call and was basically THREATENED into settling a debt I was ACTIVELY paying on.. This was a 3rd department within this organization so obviously a case of the left hand not knowing what the right hand was doing.

I was also told that it would not longer report on my credit as a collection account and a charge off account, have recently been made aware that the debt will not be marked as PAID IN FULL but SETTLED IN FULL and will suffer for the next 7.5 years.

That is about all I can think of...

Re: Impact of settled in full?

AutumnC74 — Fri, 04 May 2012 21:35:53 GMT

@llecs - I settled for $1296 less than the charged off amount, paying $5076 of a $6372 debt. Three more payments and I would have paid in full but I was not given that option.

Re: Impact of settled in full?

AndySoCal — Sat, 05 May 2012 00:10:10 GMT

How recently did the charge off happen and also what type of account is it?

Re: Impact of settled in full?

Tikon — Sat, 05 May 2012 05:20:42 GMT

llecs wrote:
Also, by law, if a collector says they are going to sue, then they have to sue. They aren't allowed to make empty threats. I didn't look at the balance paid (if posted) and money is always relative, but If I owed $15,000 as an example, and they offered to settle for $5000, then I'd rush and jump at the offer, duress or no duress.

Anytime with law there're always grey area.

"We will sue you if you don't do x" is certainly a threat and collection regulations say they should fully intend to sue if x is not met.

However:

"We will pursue our legal options if you don't do x" is a statement of intent without a specific action. Their legal option could be more calls if so allowed.

Or:

"We have the option to sue you if you don't do x" is a notice that they have particular legal rights and is not a threat.

Finally, given the amount of money the OP listed, I would think it's reasonable they might have intended to actually sue him.

I just don't see why the OP is outraged. He OWED over $6000 and has legally satisfied his debt by paying less than $5000. The OC lost a lot of money. If I were an underwriter I would want to be aware of that by noting the collection account on the OP's credit report.

Re: Impact of settled in full?

IRebuildCredit — Sat, 05 May 2012 07:00:43 GMT

If they threatened to sue, then you should have called their bluff in my opinion. Since you have it resolved. I believe that you can get the mark removed after you have settled the matter, therefore you should see an increase in your score.

Re: Impact of settled in full?

AutumnC74 — Sun, 06 May 2012 20:55:32 GMT

@Tikon, I'm a female. I am upset for a myriad of reasons but feel no desire to defend myself to you. I am on here to learn from my mistakes not be shamed. I am attempting to rebuild my credit and I, like most people, feel sad and frustrated and experience horrible and scary situations when attempting to rebuild. So please, in the future with regards to my posts keep your opinions and/or judgment to yourself but feel free to share your knowledge and experience. For some people, sharing their secret credit lives is scary and takes a lot of courage and to be met with judgment and condemnation can compound negative feelings like guilt, shame and humiliation. Thanks.