01-04-2011 02:27 PM
I want to pay off my items in collections in full, if I have to, to get them taken care of and eventually better my credit.
What pitfalls do I want to look out for, or what do I want to get from the CA's and OC's to put myself in the best postion for the long run?
Keep in mind that I have the money to PIF, and have no problem going that route to get the best result.
These are not medical related bills.
01-04-2011 05:49 PM
A lot depends on what you are trying to do, and the current situation with the account.
Paying a legit debt can be for the purpose of simply wanting to pay legit debt you owe, getting a settlement for less than the full amount, for the purpose of preventing further actions, such legal action, or it can also be done to atempt to get items removed from your CR, thus improving your credit score. So there is no "best" way to handle an individual debt.
One of the primary concerns with unpaid debt is the potential for legal action. To evaluate this, you need to first know your state statute of limitations on the debt. The SOL varies from state to state, and defines when you can invoke it as a legal defense should you be sued.
A full PIF, of course, immediately settles the debt, so ends future peril. However, any payment of a debt does not require deletion of any prior reporting of accurate delinqueincies in your CR, so does not, in and of itself, result in any improvment of your credit score due to deletion of derogs.
So some will try to offer a PIF, but consitional on the creditor agreeing, in advance, to the pre-condition of CR deletion of certain drogs. This is called a a PFD offer.
The advantage to a PFD is that, if accepted, it both settles the debt and improves your credit score as as a result of CR deletions. The disadvantage is that it is a totally conditional offer that the credtor has no obligation to accept, to if not accepted, the debt just continues. It is highly recommended that, before you make a PFD offer, you know if your state SOL has expired.
The ultimate payment option attempted by some is to send a PFD offer that does offer a full PIF, but instead offers a settlement for less than the full amount. The additonal advantge of a settlement PFD is that, in addtion to the benefits of a PIF PFD, it costs you less to pay. The additional disadvantages of a settlent with a reqwuest ot also delted is that it now adds two pre-conditions for payment (deletion, and acceptance of less than the full debt). This usually reduces your chances of their PFD acceptance.
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