Settlement letter example?

[lumierephoto]

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@RobertEG wrote:

When an account is first reported by the OC as a charge-off,  the original amount of the debt charged-off by the OC is stored under separate field code 23 of your credit file.  That remains as a separate credit file reporting, and may not reflect the current debt owed.

When the debt continues to remain unpaid, most states permit the continued accrual of interest and fees on the unpaid debt.  That accrual of additional amount due can be added to the initial CO amount, and is then posted under field code 21 of your credit file as the current amount due.  Totally legitimate, state law permitting.

When you finally pay a debt, either in full or by settlemement, and get agreement that it is legally paid in full, the CRAs have only one account status code for the account, under field code 13, and that is that the account is now paid and closed with $0 blance due.  Account status code 17A, field code 13.  Then both the OC and any CA must update their reportting to paid, closed.

Hwever, they retain under payment amounts coding, whethter the balance paid was the full amount, or settled for less than the full amount.

When creditors get a CR, or FICO scores you, it is a more comprehensive look at your credit file, and not just what you see in the plain vanilla consumer credit report you have access to. It shows PIF vs settlement, by way of various field codes other than jsut current account status of "paid."

You may get advice on how much of the original charge-off amount is appropriate to offer, but that whole logic, in my mind, kinda breaks down as the debt gets older.

If a debt was charged off, for example, 3-4 years ago, and they are entitled to interest and fees on the unpaid debt, I dont see much relevancy to the amount of the debt 3-4 years ago, at the time of the charge-off.  A CO does not freeze accountabilty for accrual of further  interest on their initial provison of funds.

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Thanks for all the advice. I'm not going to challenge you on what you know cause obviously you have a lot more insight. And I'd definitely agree that by law they are entitled to the full amount based on the contract that you have when you sign up for a CC.

Any good settlement letters here you could point me to?

Thanks again!

[MarineVietVet]

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@RobertEG wrote:

I dont understand how settlement of a debt is considered a major derog. 

FICO scores delinquencies and derogs that occured along the path of the debt, and not how, or even if, it is paid. 

Settlement vs PIF is an issue for future creditors when doing a manual review of your CR.  Settlements definately are viewed much more negatively than a PIF, but not by FICO.

If the OC has sold the debt to the debt collector, then payment to the OC is no longer an option, for they would no longer have any debt due them.

Is the OC now reporting a $0 balance on their account, thus indicating that the debt has been sold to the debt collector?

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Robert I see you write this over and over and have never understood where you get this. While payment history (which does indeed include delinquencies and derogatories) is 35% of your total score the other 65% has nothing whatsoever to do with negative items.

• Amount owing on accounts
• Amount owing on specific types of accounts
• Lack of a specific type of balance, in some cases
• Number of accounts with balances
• Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts)
• Proportion of installment loan amounts still owing (proportion of balance to original loan amount on certain types of installment loans)
• Time since accounts opened
• Time since accounts opened, by specific type of account
• Time since account activity
• Number of recently opened accounts, and proportion of accounts that are recently opened, by type of account
• Number of recent credit inquiries
• Time since recent account opening(s), by type of account
• Time since credit inquiry(s)
• Re-establishment of positive credit history following past payment problems
• Number of (presence, prevalence, and recent information on) various types of accounts (credit cards, retail accounts, installment loans, mortgage, consumer finance accounts, etc.)

 Source for this information: What's In Your Score. So according to this FICO does score more than "delinquencies and derogs that occured along the path of the debt, and not how, or even if, it is paid".

From a BK years ago to:
EX - 9/09 pulled by lender 802, EQ - 10/10-813, TU - 10/10-774

"Some people spend an entire lifetime wondering if they've made a difference. The Marines don't have that problem".

[Cherriwyn]

Ed_in _NJ

Are you saying that the balance on the credit report is not the charge-off amount?  If so, where would I get the amount charged off?