Am I taking the right steps?

[charmcity]

I started seriously evaluating my credit situation last Spring. I opened up an Orchard Bank card which I've paid on time every month for almost a year now.

I have had a hard time of figuring out who and what I owe until just recently. I've been pulling the FICO credit reports and they don't really provide me with all of the contact information I need. I finally pulled the annualcreditreport.com reports and sent a PFD letter to 6 of my bad accounts. These range from $84 to $600, but are all 2+ years old. I have enough money to pay them ALL off in full right now, but I am hoping that they will agree to remove the negative information in exchange for a full payment. Realistically, what should I expect if offering a full PFD?

Also, I have bad entries on my report because of an outstanding student loan. This is currently in the process of being rehabilitated, so am I correct in assuming that once this loan is rehabilitated all of the derogatory information will be removed from my credit report?

Right now, my FICO scores stand at 551 TU and 560 EQ. What kind of jump can I expect to see if only a few of the CA's accept my PFD and when my student loan rehabilitates?

Considering I have the money to be virtually debt-free (minus the student loans) right now, am I taking the right steps by trying to PFD instead of just paying them all right now and having it marked as paid?

I'm really close to the point where I will be proposing and making plans to buy a house. With my scores where they are now (551 TU and 560 EQ) will getting a mortgage ever be a possibility for me?

Any insight would be great. Thanks.

[RobertEG]

Hi Charmcity, and welcome to the forums.

You have the right basic approach, but I cannot tell you if it will work.  No one can.

A whole lot depends on the type of prior old debt, its age, what the creditor is willing to do, and how important deletion from  your CR is as opposed to stopping further action by a creditor.

A PFD is the best for you, if accepted by the creditor, for that will delete it from your CR.  Simply paying the debt wont remove it from credit scoring, but is a firm offer to pay.

The problem with a PFD offer is that it only a conditional offer to pay. The creditor may not accept it, and step it up to the next stage of adverse credit reporting.  If the debt is on a CC, for example,  they may either charge it off, post it with a third party collection agency, or bring legal action in court for a judgment, each leading to a new derog being posted to your CR.  So a PFD is a high benefit gamble with the peril of higher risk still looming.   If it is a CA, they may bring legal action.  No one can tell you for sure whether to make a PFD offer.  That is purely a personal decision.

 

Your chances of getting a PFD offer accepted depends primarily on the policy of the creditor.  Credit reporting guidelines accepted jointly by the CRAs are set forth in the “Credit Reporting Resources Guide,” which is copyrighted by the Consumer Data Industry Association, their contractor.  These are provided to all creditors who report to them.  One of the guidelines clearly specified is that no account prior reporting should be deleted based solely on payment of the account.  So if they follow the credit reporting guidelines, they should never accept a PFD offer.

 

But creditors are capitalists.  If you offer them money in their pocket, they may choose to accept it.  It is up to them.

 

A couple of other factors to consider when evaluating your chances of a PFD acceptance is the amount of the debt, and how close it is to your state statute of limitations (SOL).

The closer unpaid debt gets to your state SOL, the greater the risk becomes to the creditor for ever collecting a penny in court.  So factor that in.  You need to know your state SOL.

 

I know this is not precise advice on what to do.  Only factors to consider.

Best of luck to you!