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New Member
hairmuse
Posts: 3
Registered: ‎03-24-2009

Settled account vs. paid in full account

My husband and I have unfortunately gotten very behind in many of our credit card bills, due to the opening of a business and a cut in pay. We have been approached by some of our creditors with a settlement amount to pay off our debt. I know that this obviously would be better to pay financially for us at the moment. However, I am wondering what kind of impact would it have on our already diminshed credit rating in terms of the future and rebuilding our credit. We are looking to payoff all of our cardsat this time, but want to do what will be best for rebuilding our scores. Does anyone have any insight to the difference between a settled account and a paid in full account?
Moderator Emeritus
Posts: 11,562
Registered: ‎08-29-2007

Re: Settled account vs. paid in full account

What is the condition of the accounts now?

 

Lates, charged off?

 

A settled account has the same effect on scores as a charged off account.

 

Some creditors prefer seeing PIF accounts vs settled accounts when doing a manual review. How creditors will react to seeing settled will vary on the lender.

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New Member
hairmuse
Posts: 3
Registered: ‎03-24-2009

Re: Settled account vs. paid in full account

Sorry I'm new to this and am not sure about all the abbreviations. Some of the accounts have been charged off. meanwhile, I have been contacted by some collection agencies and they are willing to take a settlement, which is less than what we owe, but I'm unsure of how this will affect our credit rebuilding process. Would you suggest to pay everything in full to these people or take the settlement. Also, we have the means to pay everything off, but some accounts are just behind. Does paying them off in full immediately as opposed to making big payments over the next several months have a better effect on our rebuilding as well?

I'm just trying to figure out what is best..

 

Thanks 

Moderator Emeritus
Posts: 11,562
Registered: ‎08-29-2007

Re: Settled account vs. paid in full account

PIF vs settle always looks better to future creditors.

 

If the account is charged off, then having the settled comment added vs paid after charge off, should not make much of a difference as FICO sees a CO and a settled account as the same.

 

If the account has not been charged off, only shows late payments, then settling will likely cause more damage to your score than PIF and having only lates.

 

On the accounts that are just behind, are they still open? If so, I'd pay them off and begin using them wisely. Eventually after several months of good use, send GW letters to the creditors for removal of the lates.

 

Are the collection agencies that have contacted you reporting on your report? Is the OC for those accounts still reporting a balance? Are the accounts the CA is contacting you about already been CO?

 

 

See links in my signature, you'll find the common abbreviations we use.

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New Member
hairmuse
Posts: 3
Registered: ‎03-24-2009

Re: Settled account vs. paid in full account

Thank you for your information. As far as the agencies that are calling. I have no idea if they have reported.. I'm guessing I should pull a credit report? Or can I just ask them? I believe several of our accounts have been closed, but some have not yet gone to the agenices. So if the account has been closed, settling on the account is viewed the same to FICO. Am I correct? One of our accounts, unfortunately has been sent to an attorney and will go to court the end of April. They have too offered a settlement for wuite a bit less than the amount owed. Should we take the settlement or PIF?
Moderator Emeritus
Posts: 11,562
Registered: ‎08-29-2007

Re: Settled account vs. paid in full account


hairmuse wrote:
Thank you for your information. As far as the agencies that are calling. I have no idea if they have reported.. I'm guessing I should pull a credit report? Or can I just ask them? I believe several of our accounts have been closed, but some have not yet gone to the agenices.

 

Pull your free annual reports. See link below. Don't purchase any of the add-ons or scores they offer, just get your free reports.  

 

 

 So if the account has been closed, settling on the account is viewed the same to FICO.

 

 No, if the account is charged off(CO).

 

 

 Am I correct? One of our accounts, unfortunately has been sent to an attorney and will go to court the end of April. They have too offered a settlement for wuite a bit less than the amount owed. Should we take the settlement or PIF?

 

Check your reports to see if it is listed as a CO. Whatever you do, you DO NOT want a judgment. If you can PIF or settle and keep this from going to court do so. Get an agreement in writing that they will dismiss the court case and not seek a judgment with payment of $XXXX. If settling, also have it in writing that with a payment of $XXXX the account is considered paid in full with no further amount due or owing. Have you received a summons? Answered it?

 

Even if you settle/PIF before court, follow up and make sure the court case is dismissed. If it is still on the docket for that day, appear in court. Take your agreement and show the judge the agreed to dismiss the case without seeking judgment because you paid.


 

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Moderator Emeritus
llecs
Posts: 32,880
Registered: ‎08-04-2007

Re: Settled account vs. paid in full account

Established Contributor
MBOhio2
Posts: 946
Registered: ‎02-07-2011

Re: Settled account vs. paid in full account

I strongly agree with sidewinder's advice regarding the last item. Definitely settle to prevent a lawsuit, but make sure you get the correct things in writing to be able to show that the account was settled in full and that the creditor will dismiss any complaint/lawsuit that has already been filed.

Mid-2010 Starting Scores: FAKO EQ 476 FAKO EX 506 FICO TU98 575
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Regular Contributor
jdxprs1
Posts: 152
Registered: ‎08-20-2010

Re: Settled account vs. paid in full account

what is the amount of debt?

 

before you settle, consider the fact that myfico will actually give you a better score if you file bankruptcy than if you pay back charged off accounts.

 

trust me, i learned this first hand.


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Current Score: 556
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New Visitor
bdb
Posts: 3
Registered: ‎03-18-2011

Re: Settled account vs. paid in full account

I have two HELOC's (one for $47K and one for $30K).  I do need to get a release of lien in order to transfer/sell  the properties so I need to work with the bank in order to do so.  I just wonder if there is a benefit to actually paying the account off in full once it is charged off.


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