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New Member
2manycards
Posts: 6
Registered: ‎01-27-2009

Debt Settlement?

I have about $55,000 in credit card debt, and I'm thinking about debt settlement.  My Fico score is 721 right now.  If I settle my debts, how much will my score drop and will I be able to refinance my house in a year and a half  when my arm readjusts?   I called my morgage company a few days ago, and they said that I would not be able to refinance because I am "underwater".  Chances are, I will still be underwater with my morgage in 2 years...Help!  I do not know what to do...How long will it take me to bring my Fico score up to 721 again?

 

Thank you!

Mega Contributor
Creditaddict
Posts: 18,977
Registered: ‎10-23-2007

Re: Debt Settlement?

debt settlement will bring you lower than a bankruptcy would with your credit score... 400's I would guess.

because basically you are instantly closing out all your cards and paying less than you owe, but most companies will not work with you until you stop paying the accounts for some time.

many banks might work with you to lock in a lower apr and special payment for a 12 month period after you miss 1 or 2 payments, all options are going to quickly knock you out of 700 club and probably 600 club. 

Fico Scores: EQ 657 Cabelas, TU 653 Barclay, EX 699 Wells (07-27-14)
You will have to put up Electric Fence to keep me in the garden!
Highest Limit: Fidelity Amex $25k (AU)
Lowest Limit: Express $300
Over 30 Cards in between :smileytongue:
New Member
2manycards
Posts: 6
Registered: ‎01-27-2009

Re: Debt Settlement?

Would anyone recommend debt settlement or is that something to stay away from?
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Community Leader
Epic Contributor
haulingthescoreup
Posts: 28,115
Registered: ‎04-01-2007

Re: Debt Settlement?

Debt settlement/ debt negotiation programs are so unethical and so damaging to your credit that we don't even discuss them here, other than to advise that you stay far, far away.

This link might help:

link to FTC Webste: Knee Deep in Debt
* Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007
Regular Contributor
Ishmael109
Posts: 184
Registered: ‎03-04-2008

Re: Debt Settlement?

[ Edited ]

My friend used a debt settlement company. The $$ she spent paying them, is $$ that she should have used to pay an attorney to file bankruptcy. They did "settle" a few of her debts, but her credit is trashed. She also had a debt that BOA refused to settle, for 17K.., and one from Amex for 10K. She recently filed a 7, as they began garnishing so much from her wages, that she couldn't cover basic expenses, such as rent, and food.

 

Many folks think this is a better option to file Bankruptcy. After seeing what my friend is going through, and helping her wade through this mess, it's not. Had she initially filed back in 2006, she would be "rebuilding" right now. All she did was throw good $ away, and prolong the inevitable.

Message Edited by Ishmael109 on 01-28-2009 05:08 AM
Established Contributor
rmily
Posts: 670
Registered: ‎07-12-2008

Re: Debt Settlement?

If you're not making any progress on your own and you've already cut expenses (cut cable, the newspaper, eating out, etc) you might consider debt management.  Check the NFCC for reputable companies in your area.  You might also consider seeking a second job part time to get some extra income flowing..  If any of your cards have high interest rates, you could call and ask them to reduce it.  Some might knock a few points off "permanently" and some might give you great promo rates for a few months.  Every little bit helps..
New Contributor
mamalawery
Posts: 71
Registered: ‎03-22-2007

Re: Debt Settlement?

[ Edited ]

you shouldn't use debt sttl companies!!!

 

1. you can sttl your own accts for free.

 

2. they will not pay anything on your accts until they are about to charge off (usually with no payment from 90 to 180 days depending on the creditor) from your creditor's causing your scores to go down to a # you wouldn't believe was possible.

 

3. creditor's will not speak to anyone but the person's on the acct. the debt sttl company will tell you that signing a poa will allow them to sttl your debts and they will be lying.the creditor's will not speak to them.

 

4. your creditor's can, and may, choose to take you thru arbitration for the full bal if you knowingly work with these companies. what debt sttl companies don't tell you is that they will not rep you in court if this happens.

 

5. debt sttl take the funds you are paying them and put it in escrow, and do not make pymts to your accts during the entire time you think they are paying. that is why they tell you not to talk to your creditor's and to change your address to theirs on your accts. you are then unknowing of what is happening to your acct because you are not receiving yor statements to see it past due. 

 

if you are having problems paying your bills, call the creditor's directly. all of them have reduce pymt prog. if a rep tells you there is nothing they can do for you. HANG UP AND CALL AGAIN TO SPEAK WITH SOMEONE WHO WILL!!! please, i can't stress this enough.

 

if youhave the funds call your creditor's and sttl yourself. don't pay someone a fee to destroy your credit.

 

p.s. watch out because "attorney's" offices do debt sttl too and it is the same for them. 

 

your score with probably go down, but aleast your cbr's will reflect that you paid the debt's before they charged off. which is when the bank will sell the debt to a collection agency or atty off to collect because you didn't pay the accts or used debt sttl.

 

with your score you have been responsible so i am just suggestiong you do take this route. 

 


 

Message Edited by mamalawery on 02-08-2009 03:18 PM
***I was an app addict, and I'm not ashamed to say it!***
Established Member
mf91745
Posts: 30
Registered: ‎09-13-2011

Re: Debt Settlement?


Creditaddict wrote:

debt settlement will bring you lower than a bankruptcy would with your credit score... 400's I would guess. 


This is an old post, but just so people out there have the right information, myFICO itself says that a debt settlement hurts your score ONLY about half as much as a bankruptcy.

 

http://finance.yahoo.com/banking-budgeting/article/108239/fICO-reveals-how-common-credit-mistakes-af...



http://www.myfico.com/crediteducation/questions/credit_problem_comparison.aspx

 

FYI.


myFICO is the consumer division of FICO. Since its introduction 20 years ago, the FICO® Score has become a global standard for measuring credit risk in the banking, mortgage, credit card, auto and retail industries. 90 of the top 100 largest U.S. financial institutions use the FICO Score to make consumer credit decisions.

>> About myFICO
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