topic That site really does offer some good advice. Also, mayb... in Understanding FICO® Scoring

Can someone offer advice?

Drew — Wed, 28 Mar 2007 03:05:28 GMT

I have been attempting to pay off my debts and need some advice on the next step.

I established credit two years ago and it hasn't been peaches since then. Originally, I purchased a brand new car, but ended up selling it back to the dealership, having to pay off the difference. My credit report shows that I paid off 25,000.00 in a few months, but I'm not even sure if that helped my score at all. The turning point was when I lost my job but still got approved for various credit and charge cards at the time. I accumulated more than 12,000.00 in unsecured debt.

Since then, in a years time, I have paid off a 5,000.00 account, on time. After a while, the other accounts were left charged off by the original creditors. So, what I've started doing is, settling my accounts. Up until recently I thought this was the best thing to do, but have been reading forums that tell me otherwise.

When it breaks down, I settled 3 accounts but have 7 remaining (small accounts). I really would like my fico score to go up, so should I attempt to pay in full or will settling in full suffice? I would appreciate any feedback, thanks.

It Doesn't Matter

Anonymous — Wed, 28 Mar 2007 03:31:12 GMT

The FICO formula is utterly indifferent to whether or not a chargeoff is paid or not. The FICO system is designed to only log negative data about an account and to ignore any positive data that comes in afterwards. Once it charges off, that's the end of the story...you get a big fat ding and there's nothing you can do about it.

The only advantage to having a charge-off listed as "paid" is that, for loans where a human actually has input on approving or rejecting you (many mortgages and some auto loans) having it listed as "paid" might work slightly in your favor.

But my advice is to not pay anything more on the charge-offs. To FICO, it's water over the dam, and the system cares only about rubbing your nose in it for the next 7 to 10 years, regardless of any efforts you undertake to rectify the defaults.

My bottom-line advice (and it may not win me any popularity points, but you'll see from my other posts I tell the unvarnished truth) is to try and apply for a credit card or two. Not to use for credit, mind you, but simply to see if you have any chance of credit score recovery. If you get rejected, then your FICO is beyond repair, and you're best off to just not worry about it until the charge-offs drop off your account sometime during the next decade. If you really want to buy a house, look overseas where they don't care about FICO.

If you can get an unsecured credit card, then you may have a chance to raise your FICO. Keep the card, and charge just enough to get a bill (usually around $20). Give it about nine months, keeping just enough of a balance to have a bill, and see if your FICO goes up. If it does, you may be able to recover. Try going for a credit-line increase. If it doesn't, or you get rejected for a credit-line increase, just forget about FICO; it's no use trying to raise it.

Drew, please don't listen to the negativity. You CAN tur...

Anonymous — Wed, 28 Mar 2007 04:46:36 GMT

Drew, please don't listen to the negativity. You CAN turn your score around. I'm not sure what the best advice for you is on the charge offs, but definitely try to get an unsecured card or two and use them responsibly. If you ever decide to get a mortgage, they will most likely make you pay off any collections you have, so keep that in mind. Acouple of years ago, my score was 520. I started settling my old baddies and got a couple of small unsecured cards, and now I'm at 580. I let my utilization get to 100% which was bad, now it's down so I'll let you know next week if it helped!

Yes, by all means try and get an unsecured card. The prob...

Anonymous — Wed, 28 Mar 2007 06:52:22 GMT

Yes, by all means try and get an unsecured card. The problem you'll run into is that they won't raise your score unless you get a higher credit limit, at least $1000 or so. But they won't let you get a credit-line increase because your score is too low. But you can't get your score up if all you have are small cards. Get the picture? That's EXACTLY what happened to me. And there's no way out. They will NOT give you those CLIs without a high credit score, and they will NOT raise your score without them.

try being an authorized user

babygirl — Wed, 28 Mar 2007 11:33:13 GMT

Get someone to put you on as an authorized users on a major credit card. This will instantly increase your credit score. From reading many messages in these forms I learn you can increase your FICO scores this way.

Thanks

Drew — Wed, 28 Mar 2007 14:29:05 GMT

I appreciate everyone's feedback on the matter.

I would like to know a little bit more about settling an account versus paying in full, though.

The other thing is, I have an open charge card with a 6,000 credit line, which I don't know if it helps at all. But I have a 0 balance on that card as of last December. I know Lasalle Bank is also offering a secured loan program where they deposit money in a locked savings account that you eventually pay off. Would that help out my score at all?

"Yes, by all means try and get an unsecured card. Th...

Anonymous — Wed, 28 Mar 2007 14:49:03 GMT

"Yes, by all means try and get an unsecured card. The problem you'll run into is that they won't raise your score unless you get a higher credit limit, at least $1000 or so. But they won't let you get a credit-line increase because your score is too low. But you can't get your score up if all you have are small cards. Get the picture? That's EXACTLY what happened to me. And there's no way out. They will NOT give you those CLIs without a high credit score, and they will NOT raise your score without them. "

Not true. My two $300 limit cards helped my score, my husband's score, and it does the same for others. Make your payments on time for a while and they'll eventually raise your limit. Once you start rebuilding you can ditch your loser cards for better ones.

"The problem you'll run into is that they won't rais...

Anonymous — Wed, 28 Mar 2007 17:25:26 GMT

"The problem you'll run into is that they won't raise your score unless you get a higher credit limit, at least $1000 or ..."

You don't need any particular limit for a good score. In fact your limits aren't even factored into the score, only utilization. And it requires almost no effort to have that be zero.

" I would like to know a little bit more about settling a...

Anonymous — Wed, 28 Mar 2007 17:28:08 GMT

I would like to know a little bit more about settling an account versus paying in full, though.

Depends on whether the card is reporting (and again assuming it's all positive payment history).

With respect to selling/paying in full - has your account been sold to a CA, or still with the original creditor? In either case, your ideal scenario is getting an agreement to pay in full in exchenge for them not reporting it. However, depending upon the answer to the previous question, they way to go about it may vary.

"Eventually." Is that right about the time the...

Anonymous — Wed, 28 Mar 2007 18:23:45 GMT

@Anonymous wrote:
Make your payments on time for a while and they'll eventually raise your limit. Once you start rebuilding you can ditch your loser cards for better ones.

"Eventually." Is that right about the time the sun moves off the main sequence, swells into a red giant, and fries the Earth? I've been at this for a year now and have exactly NOTHING to show for it.

I don't believe any of my accounts have been sold to the...

Drew — Wed, 28 Mar 2007 18:40:31 GMT

okrogius wrote:

Depends on whether the card is reporting (and again assuming it's all positive payment history).

With respect to selling/paying in full - has your account been sold to a CA, or still with the original creditor? In either case, your ideal scenario is getting an agreement to pay in full in exchenge for them not reporting it. However, depending upon the answer to the previous question, they way to go about it may vary.

I don't believe any of my accounts have been sold to the agencies. On my credit report it says "charged off", but the agency's are telling me they don't own the account, the original creditor does.

So, I'm a bit concerned that the agencies may be lying.

How could I know for sure that the original creditor owned the account?

Also, I have been settling the accounts for 60 percent of the original balances, was this a dumb move? Should I wait to get some documentation for the other accounts?

Message Edited by Drew on 03-28-2007 11:40 AM

Dumb? No. You just didn't realize how counterintuitive...

Anonymous — Wed, 28 Mar 2007 21:39:17 GMT

Drew wrote:

okrogius wrote:

Depends on whether the card is reporting (and again assuming it's all positive payment history).

With respect to selling/paying in full - has your account been sold to a CA, or still with the original creditor? In either case, your ideal scenario is getting an agreement to pay in full in exchenge for them not reporting it. However, depending upon the answer to the previous question, they way to go about it may vary.

I don't believe any of my accounts have been sold to the agencies. On my credit report it says "charged off", but the agency's are telling me they don't own the account, the original creditor does.
So, I'm a bit concerned that the agencies may be lying.

How could I know for sure that the original creditor owned the account?

Also, I have been settling the accounts for 60 percent of the original balances, was this a dumb move? Should I wait to get some documentation for the other accounts?

Message Edited by Drew on 03-28-2007 11:40 AM

Dumb? No. You just didn't realize how counterintuitive the whole FICO system is. You probably thought, gee, if I pay a debt, the credit scoring system will see I am conscientious, and raise my score. It's very logical...and, unfortunately, dead wrong.

The only way I would pay a charge-off is if the original creditor agrees to remove the account from my credit report entirely. So far the ones I've dealt with are more interested in seeing my nose rubbed in my financial misfortunes for the next seven to ten years than they are in actually resolving the problem in a mutually beneficial way. Their loss.

I guess where I was getting at was, what documentation sh...

Drew — Thu, 29 Mar 2007 01:45:00 GMT

TheNewWorldMan wrote:

Dumb? No. You just didn't realize how counterintuitive the whole FICO system is. You probably thought, gee, if I pay a debt, the credit scoring system will see I am conscientious, and raise my score. It's very logical...and, unfortunately, dead wrong.

The only way I would pay a charge-off is if the original creditor agrees to remove the account from my credit report entirely. So far the ones I've dealt with are more interested in seeing my nose rubbed in my financial misfortunes for the next seven to ten years than they are in actually resolving the problem in a mutually beneficial way. Their loss.

I guess where I was getting at was, what documentation should I request and how will I know the original creditor owns the account?

I'm told that if agencies own the account, they pay cents to the dollar to take ownership. I'm willing to settle the accounts but I need to know if I should be negotiating 60 percent still or trying to get lower settlements than my original balances. Agencies are telling me "the client is not willing to go lower", and I'm thinking that is bologna because there's a possibility the original creditor doesn't own the account anymore. Any thoughts?

Received another call from a collection agency saying the...

Drew — Fri, 30 Mar 2007 02:16:46 GMT

Received another call from a collection agency saying they'll take a 50% settlement if I pay tomorrow. I told him I wouldn't have it until next week and he said then I would have to pay 70%.

Any suggestions on where I should go from here?

I would tell them to...arrgh, this is a family forum... C...

Anonymous — Fri, 30 Mar 2007 07:16:57 GMT

I would tell them to...arrgh, this is a family forum...

Check your calendar. What likely happened is that some collection agent was anxious to meet his or her monthly quota of closed accounts, and offered you a good deal. Fortunately, there are 12 ends-of-months in every year, so the opportunity will likely arise again.

Bear in mind FICO won't be affected whether you settle, pay in full, or tell the collection agents to take a hike. Lenders tend to regard paid in full as a little better than settled, which in turn is slightly more favorable than unpaid...but overall, once you default and get a charge-off, it's water over the dam.

Yea, I'm going to see how their mood will quickly changes...

Drew — Fri, 30 Mar 2007 13:27:29 GMT

TheNewWorldMan wrote:
I would tell them to...arrgh, this is a family forum...

Check your calendar. What likely happened is that some collection agent was anxious to meet his or her monthly quota of closed accounts, and offered you a good deal. Fortunately, there are 12 ends-of-months in every year, so the opportunity will likely arise again.

Bear in mind FICO won't be affected whether you settle, pay in full, or tell the collection agents to take a hike. Lenders tend to regard paid in full as a little better than settled, which in turn is slightly more favorable than unpaid...but overall, once you default and get a charge-off, it's water over the dam.

Yea, I'm going to see how their mood will quickly changes once the end of April comes around. I'm thinking paying full is something I'm not willing to do regardless. That's tons of extra money for the collection agency and with really no difference if I settled.

My only problem at this point is justifying ownership of the account. Should I ask for documentation to be sent with current ownership?

Definitely...if you have doubts the account is yours, by...

Anonymous — Fri, 30 Mar 2007 17:48:32 GMT

Definitely...if you have doubts the account is yours, by all means dispute it. If they can't pony up some documentation showing the debt is truly yours, they have to remove it.

I think we're going around the wrong concern. I'm not co...

Drew — Fri, 30 Mar 2007 19:29:09 GMT

I apologize, I'm not sure if I'm being clear enough here. I'm not concerned if I owe the money, rather who owns the account in which I'll be paying the money to. If I'm paying a collection agency as opposed to the original creditor, the agency may have only paid cents to the dollar to obtain the account, in which case I wouldn't want to settle on a high percentage. Does that make sense?

Message Edited by Drew on 03-30-2007 12:29 PM

Collections.

Anonymous — Fri, 30 Mar 2007 20:01:35 GMT

Paying off the collections will probably not improve your credit - it will prevent another company from buying the account and reposting it - which can hurt your credit.

I think it is good to always good to pay off the bills. Before I would accept the offer, I would get a pay agreement from them. Many say they will settle the account, but it does not mean that it will close the account. If you get a pay statement faxed to you for the rate, then you should be fine. It is ok to pay the collection company, because they probably own the account. They are usually bought for 10 to 50 cents on the dollar (depends on the orginal date of collection).

If you have also apply for a mortage and the collection is already paid, then you could end up with a little better rate.

Thanks for the advice. So, is it safe to say that my ta...

Drew — Fri, 30 Mar 2007 20:30:36 GMT

DRASDALL wrote:
Paying off the collections will probably not improve your credit - it will prevent another company from buying the account and reposting it - which can hurt your credit.

I think it is good to always good to pay off the bills. Before I would accept the offer, I would get a pay agreement from them. Many say they will settle the account, but it does not mean that it will close the account. If you get a pay statement faxed to you for the rate, then you should be fine. It is ok to pay the collection company, because they probably own the account. They are usually bought for 10 to 50 cents on the dollar (depends on the orginal date of collection).

If you have also apply for a mortage and the collection is already paid, then you could end up with a little better rate.

Thanks for the advice.

So, is it safe to say that my target settlements should be atleast 50%?