settlement instead of complete pay off.

[Anonymous]

Ok, new here and can figure out some of the abbreviations but still confused on most.

My question is, I have 3 accounts that have been closed by the creditor (HSBC) one of them has been charged off, sent to collections. The others are over 90 days past due. I owe roughly 6300 on these accounts. 2 cards will cost me 1410 to make current the other card in collections is due in full in the amount of 1847.  I am considering calling HSBC and seeing if we could make a settlement agreement. Is this a good idea or should I pay current and try to meet my monthly payment obligations. I am paycheck to paycheck now and don't think I would be able to maintain a payment every month. Would a settlement hurt my score? How would it effect it and would a PFD be an option?  Thanks.

[modernsurrender]

If you're going to do it a PFD would be best if they'll accept it.  Deletion is usually the only way to correct any portion of the damage caused by a collection.  UNLESS they're like my capital one account is.  It's been closed since 05 as a charge off, but the way they report it, the balance still figures into my UTL, so even though they won't delete I'll have to settle just to get my UTL down from being waaaaaaaaay above 100%.

If you settle (there's another thread about this right now) you'll get a 1099c most likely.  Which means that you'll have to pay taxes on whatever you don't actually pay in the settlement when you file for 08.  (So if they settle for 600 of the 1800, you'd have to pay taxes for the 1200 because it's then considered "income" when you file your taxes next year.)

I don't think a settlement would necessarily hurt your score, unless they haven't been reporting monthly, and update you as paid but smack a Charge Off for whatever month you pay it onto your reports.  I'm not too sure about that part... I'm sure someone in blue will chime in soon lol

All this only applies to the collection card though... the two that are still open would be a different story, all mine are long since closed haha so that's the type of info I've been looking up

Message Edited by modernsurrender on 02-27-2008 01:51 PM

[Anonymous]

what is a UTL?? I am very new to this and don't understand the lingo here yet.

[modernsurrender]

Sorry about that, it's your utilization.  In terms of credit cards, it's the amount you owe/credit limit.  Lower is better (less than 10% is great).  My Cap1 charged off account though reports funny so it's making my overall utilization outrageously high.  I have no open revolving credit but I have a balance with them of over $1000 making my utl range between 140-240% depending on the report I look at.  Looks really bad so I'll have to call and settle eventually and hope for a low settlement amount haha.