Which Do I pay first

[Heavanly1]

I'm  have three baddies on my credit report that I need to take care of, but I'm at a loss as to what order to tackle them in. My goal is to tackle them in a way that boost my credit scores the fastest. My baddies are:

1. Capital One

    Charged off credit card still with OC

    Current balance $2658

    - Cap One offered settlement in full for $1484

2. HSBC

    Charged off credit card still with OC

    Current balance $788

    - HSBC offered settlement in full for $395

    - Could pay in full, but won't attempt that until I send a PFD

3. Utility Collection

    Current balance $306

    -mailed a PFD; awaiting response

I'll pay the utility collection in full regardless of whether they accept the PFD or not. As for the credit card accounts: Which one do I pay first??? And if HSBC rejects the PFD, should I pay the settlement amount or pay in full????

[AndySoCal]

I would pay in full  because settled accounts are considered deogatory.  If the balance is over te credit limit see if they will remove the late fees and set payment plan for ballance in full. The account being over the limit is hurting your score as well as the status of the account. I would pay the account is the more recent derog account first.

On the utility collection talk to the OC and see if they can pull back the collection account from the CA. If so pay the OC other try a PFD with the CA.

[alleycat1975]

Andy, isn't it right though that in the case of an account that is already charged off,  a settlement is no more derogatory as paying in full?  Because regardless of what the status of the account was its still a charged off account weather or not it was paid in full or paid in settlement?

This is the impression i've gotten from lenders and this forum so far.  Correct me if i'm wrong though because I've settled several accounts so far. 

If this is the case then I would say pay the utility and DV the other 2 then PFD them and work from there.  Settle as a last resort.    Thats what I would do

[RobertEG]

Looking at this scenario, the fastest way to improve current credit score may be missing  the point of tuture scoring impacts.

You currently have two OC accounts for which the OC has charged-off the debt. Either could be referred or sold to a debt collector, totally at the option of the OC, resulting in a subsequent post of a CA to your CR, or even legal action.  When the OC did the CO, they already recovered some of the unpaid debt by using the CO as a tax writeoff. So that probably already reduced their incentive for acceptance of a PFD.

If you offer a PFD to the OC, and just wait, they dont have to ever respond to the PFD, and may just place it for collection. Thus, possible further harm to your credit score.

They might accept the PFD, but it is a risk to just send a PFD offer, and wait.

Same for the collection.  You can offer PFD to them, but they dont have to accept or respond.  That may lead to legal action.  Based on the relatively low amount of the outstanding collection debt, they may not bring legal action.  Your risk.

Payment, either for the full amount, or for a lesser amount in a settlement offer, is a fulfillment of the debt.  But payment or lack of payment is not an immediate FICO scoring issue.  FICO does not score payment.  Payment in full looks better on manual review of your credit report by potential future lendors than a payment that did not fulfill the entire debt.

I thnk your biggest risk is the Cap1 CO.  It has the hghest debt balance, and thus, in my opinion has the greatest likelihood of pursued action by the OC.

I would, based only on what you have posted,  first address the Cap1 CO by acceptance of a settlement offer. 

But I dont offer firm advice.  You can, of course, risk holding out for a PFD acceptance.

[Heavanly1]

Thanks to everyone for the sound advice.

I've decided to settle with HSBC and pay the utility collection in full (I will contact the OC first to see if they will accept payment).

I've also set up a payment arrangement with Cap 1, which includes dropping the interest rate to 0%. This should dwart any future legal action.

Thanks again!

[bicknar]

Good Luck,

Just something with the settlements.  You may have tax liability if they submit to the IRS.  I forget the form number but any amount forgiven can be counted as income for you.  Sucks, I know.  But just something to look out for.  I saw a rash of them on these boards around tax time.  Other than that, make sure you get in writing that your settlement fulfills the debt obligation in full.  You don't want them taking partial payment and selling the rest off to another CA and having it come back to you at a later date.

A

[Heavanly1]

Thanks for the advice Bicknar

I've received settlement offers from both HSBC and Capital One stating that the reduced amounts will be considered settlement in full for the accounts.

I'm also aware of the 1099 IRS forms. I'll only receive one for the Capital One account since they're only required for amount forgiven greater than $600.

Another update:

I contacted the original creditor for the utility account and paid the balance in full. The account will be pulled out of collections and will be removed from my credit report. That means, no more collection accounts on my reports!! Shouldn't that in itself increase my score?

[Anonymous]

Its a start but if it does it will only be a little bit. 

Congrats nevertheless 

[Heavanly1]

So,

I was in the midst of settling the last of these accounts... Capital One.

When I intially contacted Capital One, I was told that the account was being "serviced" by a collection agency (though Capital One still owned the debt) and that I would need to contact them directly to work out arrangements/payments. I spoke to this collection agency on numerous occasions, and let's just say, it wasn't easy. I would have one person tell me one thing and then another person tell me something completely different; they would send me written agreements that weren't signed; etc. Eventually, the collection agency offered me one of two options: a lump sum payment of $1424 or 12 monthly payments of $148, for a total of $1776. I agreed to the monthly payments. I refused to give them any banking information and instead told them I would submit all payments through the Capital One Solutions website.

I was so fed up after the whole experience that I shot off a long and detailed email to Capital One Customer Service explaining my frustrations. When I went to log into my account this morning, I couldn't get in. I called Capital One. They informed me that they had received my complaint about the collection agency and had therefore pulled my account back from them. They offered to settle the account for $1450, which could be paid in ten monthly installments, and 0% interest while the account was in repayment. That was a better deal than what the collection agency was offering!!! 

I'll have the entire $1400 paid off within the next 6 weeks but in this situation, Capital One really did make things easy!