topic Re: How does a settlement impact FICO? in Understanding FICO® Scoring

How does a settlement impact FICO?

Anonymous — Mon, 19 Jul 2021 16:39:14 GMT

I am a co-signer on a loan. The primary has encountered a life-changing emergency and will no longer be able to pay anything.. If I reach a settlement - how will that impact my credit score. The account is current - and I otherwise have very good credit. Thank you!

Re: How does a settlement impact FICO?

Brian_Earl_Spilner — Mon, 19 Jul 2021 17:45:20 GMT

Hi, welcome to the forums.

~~Normally you wouldn't be able to negotiate a settlement until it's in default. What you would be looking to do is a voluntary repo. It will affect your credit the same as a normal repo.~~

Basically, you'll turn in the car and they'll auction it off. The balance plus fees (towing, repo, auction, storage) will be billed to the two of you. At that point, you can negotiate a settlement. While this is going on, the payments will still be due and reported as in default if neither of you pay it. It would be best to avoid that if possible. Maybe try selling it to reduce out of pocket losses.

Re: How does a settlement impact FICO?

mycreditscoreisfair — Mon, 19 Jul 2021 16:58:35 GMT

I can't say for certain as every account I have settled has reached a charged off status. I would imagine it depends on how the account gets reported. If it's reported as a charge off and then settled for a lesser amount it will greatly impact your score negatively.

Re: How does a settlement impact FICO?

Anonymous — Mon, 19 Jul 2021 17:36:11 GMT

Thanks! However, it is not an auto loan - just a personal loan.

Re: How does a settlement impact FICO?

Anonymous — Mon, 19 Jul 2021 17:36:54 GMT

Thanks!

Re: How does a settlement impact FICO?

Brian_Earl_Spilner — Mon, 19 Jul 2021 17:40:39 GMT

@Anonymous wrote:
Thanks! However, it is not an auto loan - just a personal loan.

🤦 I don't know why I thought auto. The co-signed part is probably what threw me off.

What lender is it?

Re: How does a settlement impact FICO?

Anonymous — Mon, 19 Jul 2021 17:42:00 GMT

One Main

Re: How does a settlement impact FICO?

SouthJamaica — Mon, 19 Jul 2021 17:45:17 GMT

@Anonymous wrote:
I am a co-signer on a loan. The primary has encountered a life-changing emergency and will no longer be able to pay anything.. If I reach a settlement - how will that impact my credit score. The account is current - and I otherwise have very good credit. Thank you!

It will adversely, and seriously, impact your credit score. You should treat it as though it's your own debt, and pay it.

Re: How does a settlement impact FICO?

Anonymous — Mon, 19 Jul 2021 19:34:06 GMT

^^^ this. If your reports are clean and you're a co-signed guarantor, and it goes into a negative status, you will feel the effects just as much as the person you co-signed for, and probably worse as we can be sure your credit is better. If you have no derogs, you can expect serious damage.

Re: How does a settlement impact FICO?

Anonymous — Mon, 19 Jul 2021 19:47:05 GMT

That was my fear... and yes, we have excellent credit..