Debt Settlement vs PIF

[OneDay_750]

Hello all,

I have entered into a debt settlement plan with Freedom Debt Relief to attempt to settle four accounts (total of around $15K).  My question is, how will settlement affect my scores versus a PIF?  

Also, with these accounts projected to fall off within a 1-2 years, is there a benefit considering a PIF?

BofA/PRA: $8.4K (projected to fall off Jan 2015)

Dell/Web Bank: $4.3 (Feb 2016)

BofA: $900 (May 15)

Merrick Bank: $900 (May 2015)

[llecs]

If you're projecting a fall off date, I take it these are charged-off?

If CO'd then a settlement comment wouldn't hurt any more than they are now. FICO does ding for settled accounts, but that ding is on par as a CO. You're trading one baddie for another. Now paying them off sooner rather than later would be more beneficial per your score. The creditor can still add lates even while paying them off. The sooner it is paid off, the sooner the lates stop. Also utilization will drop and that's better to reduce that sooner rather than later.

[OneDay_750]

The BofA acct was originally a FIA line of credit.  It was later bought by BofA and then sent to PRA for collection.  BofA is only reporting in EQ, while the PRA collection is listed in all three CRAs.

I was under the impression that once the OC or CA enter into a settlement agreement the amount normally froze or no more lates are charged.  Am I way off on that?  

I don't have a lot of dispossible income at the moment, so paying them off will take sometime.  At the moment, the settlement plan extends beyond the projected fall off dates for all four accounts.

Thx.

[RobertEG]

The only party that can continue to report account delinquencies is the OC.  You dont have an account with and billing by a debt collector.

If your payment agreement specifically included terms that they would cease reporting of additional delinquencies provided you comply with the payment plan, that would be binding.  If not specified in your agreement, they could continue to report delinquencies, but are not apt to do so.  I am not aware of any creditors who continue to report additional delinquencies when the consumer is complying with a repayment agreement.

As for the impact of credit report exclusion on how you should pay, OC accounts themselves do not fall off based on any credit report exclusion periods.

What becomes excluded are the indiviudal derogs that were reported under the account.  If the OC account continues to show no reporting of paid, the presence of the debt will continue to be shown in your CR.

The benefit to paying in full is that it will preclude them from reporting the additional special comment of settled for less.

If you settle for less, they have the option of reporting that fact to the CRAs.

While that comment may not affect your score, it will still look bad on a manual review, as it informs others that in the past, you did not fully pay the entire debt you obligated.  That could influence any decision by a future creditor, as it signifies that they make take a loss if they lend to you.

You can, as part of your negotiations with them, get their agreement not to report any indication that your satisfaction of the debt was for less than its full amount.

Absent any such reporting, the account will then appear to others reviewing your credit report the same as if it had been paid in full.

[OneDay_750]

Thank you Robert.  Let me make sure that I understand you correctly.

1. If I do not PIF an account and my date of initial delinquency is approaching 7 years, only derogatory information of that age will fall off my CR.  The original account will continue to show as unpaid and even new delinquent info could be added. How long can the OC continue to list the account after PIF or settlement?

2. If I settle the account, the OC has the option to report that settlement, unless they agree not to during negotiations.  Do they continue to report for 7 years after I pay the settlement amount?  How long will a CA report for?

BREAK.

I called Freedom Debt Relief today and they told me that it is not their practice to request that OC or CA refrain from reporting settlements to the CRAs as part of the deal.  That, plus what you explained about future manual reviews of my CR has me second guessing myself about my settlement plan.

I think I might cancel it and reach out to each OC or CA and enter into a payment plan to PIF.  With not much disposable income, it will take me 2-3 years, but I think it'll be better in the long run.  I was irresponsible with my debt for way too long and now have around $14K charged off.  On top of that, I owe around $8K on other credit cards that remain open (paying those down too).  

Thank you for your insight.

Robert.

[RobertEG]

It is not really an issue of how long the OC can continue "reporting".  It is already reported, and will remain unless they specifically report its deletion.

They could continue to report delinquencies, but that rarely happens.  Unless they continue to send billing statements after their have referred for collection, which is not usually done, there will be no billing due date upon which to continue to report new delinquencies.

That is not a likely scenario.

As long as the OC account remains, the only credit reporting requirement is that if any previously reported information changes, they must promtply update so as to reflect its current accuracy.  Thus, if paid, they are required to promptly update the balance to $0.

The only other provision for entire deltion of an OC account is the possible housekeeping deletion by the CRA, which they do at approx ten years after closing date of an OC account.

The OC can continue, in any subsequent reporing, to repeat the fact of the prior delinquencies.  That reporting will not extend the credit report exclusion date of any prior delinquency.  Any reporte CO will become excluded ater a date-certain of 7 years plus 180 days from the DOFD on the OC account, and any reported monthly delinquency will become excluded atter 7 years from its actual date of occurence.

As for reporting of a settlement, that is a catch-all adverse item of information, which the FCRA mandates must be excluded atter 7 years from its date of occurence.

Any reporting by the debt collector would become excluded after 7 years plus 180 days from the same DOFD on the OC account.