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Hi All!
I am back at rebuilding my credit again. Due to a divorce, my credit scores have dropped from the mid 600s to the mid 400s! I have several charge offs. One of the charge offs is with Barclay Card. The balance is $2948.20. They are offering me 2 options:
Option #1 - Pay off the balance in full in monthly payments for 18 months. However, they will not update my credit report until after it is paid in full (18 months later).
Option #2 - Settle for $1,180.00. Once settled, they will update my credit report to reflect settled in full.
I do have the funds to settle in full. However, I was hoping to use those funds to spread over multiple credit card accounts. I am leaning towards settling, just to be done with it. However, morally I want to pay it off in full.
Any suggestions?
Thanks!
While I applaud you for wanting to pay the entire debt, I will say that if they are offering to take a 35%(ish) settlement and still report it PIF, that is a win.
If they intend to report it as "paid settlement for less than original amount," that is a different thing, credit history-wise.
Taking care of chargeoffs/collections takes two things - money and time. If your money is limited (as most people's is), and especially if they are offering to report PIF on a lower amount, I'd jump on that. Even if they are going to report "settled for less" that might still be the way to go - the damage of the settlement as opposed to paying every dime of it will lessen in time, and getting the thing marked "paid" one way or another will lessen the damage from the collection/chargeoff itself, so while it isn't as ideal as "PIF" it will still help. And you'll have the other money left to negotiate with another creditor.
If you're determined to pay everything in full, to appease your conscience (and trust me, I understand that point of view myself), you can do so and just acknoledge that your rebuilding is going to require more time that way, to save up the funds to deal with each creditor. It's a matter of your personal preference, to settle or not.
I would add that if you do go the settled for less route, the creditor will be requried to report the difference between the full debt and the settlement to the IRS since it will be $600 or more. You may then have a tax obligation on that amount, but may qualify for an exemption if you are insolvent. You should check out your potential tax obligation, and if requried, keep that money available for Uncle.
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