topic Re: Pay charged off debt in full or settle for less? in Rebuilding Your Credit

Pay charged off debt in full or settle for less?

icloud987 — Sun, 04 Jul 2021 21:55:08 GMT

Happy 4th of July. I have a few questions hopefully someone can share their valuable insights.

1 If I want to pay off a debt that has been sold from the original creditor to the debt collector, is the only option left is to work directly with the debt collector?

2 If I contact the original creditor and tell them I want to pay off debt, will the original credit be able to get the debt back from the collector?

3 How do I protect myself and get proof after I pay it off? Will the copy of the check I will be sent to the collection agency suffice as proof if, in the future, I become haunted by this debt after I pay?

4 If I can afford to pay off this debt, is it better to pay it off in full than settle for less? It has been over 180 days past due and it is a "charge off "the credit report.

Thanks a lot.

Re: Pay charged off debt in full or settle for less?

dragontears — Sun, 04 Jul 2021 22:12:36 GMT

@icloud987 wrote:
Happy 4th of July. I have a few questions hopefully someone can share their valuable insights.

1 If I want to pay off a debt that has been sold from the original creditor to the debt collector, is the only option left is to work directly with the debt collector?

2 If I contact the original creditor and tell them I want to pay off debt, will the original credit be able to get the debt back from the collector?

3 How do I protect myself and get proof after I pay it off? Will the copy of the check I will be sent to the collection agency suffice as proof if, in the future, I become haunted by this debt after I pay?

4 If I can afford to pay off this debt, is it better to pay it off in full than settle for less? It has been over 180 days past due and it is a "charge off "the credit report.

Thanks a lot.

1. If the OC sold the debt to a CA, yes your only option is dealing with the CA

2. If the OC sold the debt they can't recall it, if they only assigned collection authority then you might be able to recall it.

3. The CA should be able to provide a written settlement agreement for you

4. It depends on what you mean by "better"

Re: Pay charged off debt in full or settle for less?

SoCalGardener — Sun, 04 Jul 2021 23:33:42 GMT

I probably shouldn't even try to reply, because my memory about this is fuzzy. I was hospitalized for six months, and during that time medical bills came pouring in--but sat unopened. After I was discharged, my daughter and my live-in helper started going through the mail. Several bills had gone to collections already. We contacted each company, explained what had happened and that I have stellar credit, and said we'd pay the bill immediately, in full, but wanted a promise in writing that they would remove the ding on my credit reports upon receipt of payment. They all agreed to do that, and they all kept their word!

But do note that I'm fuzzy on the details, for example, I can't say with certainty whether these agencies BOUGHT the debt, or what. All I know is they put in writing what they'd do upon receipt of full payment, and then they did it. I hope that's somewhat helpful!

Re: Pay charged off debt in full or settle for less?

icloud987 — Mon, 05 Jul 2021 00:58:50 GMT

hank you so much. Your reply is constructive.
To confirm, you meant I could ask the CA to send me the agreement in writing first and then pay them after receiving the deal?
Did you pay them through check? I hear check a safer way to protect ourselves?

Regarding "better"
I saw some of my original creditors offering me: 1) pay in full or 2) pay less. However, the debt has been listed as" over 180 days late and charged off."

I don't know which one would be better in the long run? I plan to buy a house in the next 24-27 months, so I guess what I meant better is which option would be better to rebuild credit and buy a home in the future?

Re: Pay charged off debt in full or settle for less?

icloud987 — Mon, 05 Jul 2021 04:22:18 GMT

Thanks for your valuable input.

Regarding "better"
I saw some of my original creditors offering me: 1) pay in full or 2) pay less. However, the debt has been listed as" over 180 days late and charged off."

I don't know which one would be better in the long run? I plan to buy a house in the next 24-27 months, so I guess what I meant better is which option would be better to rebuild credit and buy a home in the future?

Re: Pay charged off debt in full or settle for less?

Anonymous — Mon, 05 Jul 2021 05:55:52 GMT

@icloud987 wrote:
Thanks for your valuable input.
Regarding "better"
I saw some of my original creditors offering me: 1) pay in full or 2) pay less. However, the debt has been listed as" over 180 days late and charged off."

I don't know which one would be better in the long run? I plan to buy a house in the next 24-27 months, so I guess what I meant better is which option would be better to rebuild credit and buy a home in the future?

@icloud987Just make sure you get a PFD (pay 4 delete). Settled or full affects your pocket

Re: Pay charged off debt in full or settle for less?

dragontears — Mon, 05 Jul 2021 06:21:28 GMT

@icloud987 wrote:
Thanks for your valuable input.
Regarding "better"
I saw some of my original creditors offering me: 1) pay in full or 2) pay less. However, the debt has been listed as" over 180 days late and charged off."

I don't know which one would be better in the long run? I plan to buy a house in the next 24-27 months, so I guess what I meant better is which option would be better to rebuild credit and buy a home in the future?

Since this is an OC the odds of getting a PFD is small (very few lenders will, PFD has much better odds with CA) it is going to remain for the 7 years from DOFD. From a scoring perspective there is no difference between a CO that was settled vs. PIF.

To the best of my knowledge, no mortgage underwriter will care about a debt that was paid years ago if you stick to your timeline of 2 years and even if you bought before 2 years they still don't care about settled vs paid in full (you may have to write a LOE for some underwriters about the CO part).

Re: Pay charged off debt in full or settle for less?

Anonymous — Mon, 05 Jul 2021 07:25:59 GMT

@icloud987 wrote:
hank you so much. Your reply is constructive.
To confirm, you meant I could ask the CA to send me the agreement in writing first and then pay them after receiving the deal?

@dragontears I apologize, you're absolutely correct if it's a chargeoff. I just skimmed above where they said CA, so I was thinking it was a collection. Wait a minute he said it was sold to a debt collector?

if I'm wrong I apologize.

Re: Pay charged off debt in full or settle for less?

icloud987 — Mon, 05 Jul 2021 09:18:45 GMT

Thank you. I heard of the pay to delete, do you know if I can ask OC to do that too? Or probably only the collectors? I heard OC won't do that even if I pay in full? Do you mean to get it in writing before I pay? I also heard they don't give anything in writing. Very concerned about falling into traps.

Re: Pay charged off debt in full or settle for less?

icloud987 — Mon, 05 Jul 2021 09:25:25 GMT

Thank you so much. The reason I was thinking about paying in full is my score is slightly below 500 now, when I use the Fico simulator, it shows if I pay all debt off in full ( charged-off accounts ) My score will be about 620 in 24 months which would be barely enough to get a home loan.

So I assumed if I settle for less, my score would be even lower and maybe too low to get a home loan after 24 months?

If there is no score difference in 2 years whether I paid in full or settled, I don't see any point in paying in full then?

Can you share when it is good to pay in full? Is it only good before my debt charged off and before my score dropped?

I am new to all this.

Re: Pay charged off debt in full or settle for less?

icloud987 — Mon, 05 Jul 2021 09:26:50 GMT

I am not sure, some debt looks like sold to debt collectors or at least hired a debt collector to collect, while other debts are still with OC, but all charged off, past 180 days.

Re: Pay charged off debt in full or settle for less?

SoCalGardener — Mon, 05 Jul 2021 18:19:27 GMT

@icloud987 wrote:
hank you so much. Your reply is constructive.
To confirm, you meant I could ask the CA to send me the agreement in writing first and then pay them after receiving the deal?
Did you pay them through check? I hear check a safer way to protect ourselves?

You're welcome, I'm glad I was somewhat helpful.

Yes, we asked them to send us a written agreement that upon [immediate] receipt of payment in full, they would remove the derogatory mark from my credit bureau reports. Once we had that in hand, we paid the bill.

I don't think any of them were paid by check, but I could be wrong. I LITERALLY had hundreds of bills; some ONLY accepted checks, others had other options, and I know both my daughter and helper wrote some checks, but I'm not sure which those were. I know for sure the vast majority were paid by card (credit or debit) over the phone. It really shouldn't matter though, because in this digital age, we no longer need a hardcopy check to prove we paid a bill! Get the agreement, pay the bill however they prefer, then follow up and make sure they keep their promise. Then, if they don't, you'll have a virtual 'paper trail' to prove you paid.

Re: Pay charged off debt in full or settle for less?

OmarGB9 — Mon, 05 Jul 2021 21:00:03 GMT

@icloud987 wrote:
Thank you so much. The reason I was thinking about paying in full is my score is slightly below 500 now, when I use the Fico simulator, it shows if I pay all debt off in full ( charged-off accounts ) My score will be about 620 in 24 months which would be barely enough to get a home loan.
So I assumed if I settle for less, my score would be even lower and maybe too low to get a home loan after 24 months?
If there is no score difference in 2 years whether I paid in full or settled, I don't see any point in paying in full then?
Can you share when it is good to pay in full? Is it only good before my debt charged off and before my score dropped?
I am new to all this.

A few things here.

1. Don't pay any attention to score simulators. They don't take into account all factors, so most of the time they're inaccurate.

2. As already mentioned above, paying in full or settling for less makes no difference score-wise, however if you settle for less, the creditor would include a comment saying something to the effect of "Legally paid for less than full balance." Again this doesn't affect your score, but a mortgage UW *may* question you about it. If so, you can easily explain it away. So no big deal.

3. You're right, if there's no big difference between paying in full or settling, you might as well save some money and settle for less. Just keep in mind, when settling for less, if the forgiven balance is $600 or more, the creditor will issue a 1099-C and you'll most likely have to pay taxes on that amount because it gets counted as taxable income by the IRS. Occasions where it would behoove you to pay in full would be when you want to get back in with a creditor whom you "burned" either via BK or simply letting an account get COd. If you wish to do future business with/get another CC with a creditor whom you've got a charge off with, you'd have to pay them back in full.

Re: Pay charged off debt in full or settle for less?

icloud987 — Mon, 05 Jul 2021 23:06:33 GMT

Thanks a lot. I noted what you said, it is very helpful.

"Occasions where it would behoove you to pay in full would be when you want to get back in with a creditor whom you "burned" either via BK or simply letting an account get COd. If you wish to do future business with/get another CC with a creditor whom you've got a charge off with, you'd have to pay them back in full."

For this one, if I dont pay them back in full but settle for less amount, and if my spouse has accounts at Navy Federal, would they not allow my spouse to add me as an authorized user, on checking accounts or credit cards ever in the future? So I will never have a chance to be a member of any of the credit cards I didn't pay in full?

Re: Pay charged off debt in full or settle for less?

OmarGB9 — Tue, 06 Jul 2021 23:36:09 GMT

@icloud987 wrote:
Thanks a lot. I noted what you said, it is very helpful.
"Occasions where it would behoove you to pay in full would be when you want to get back in with a creditor whom you "burned" either via BK or simply letting an account get COd. If you wish to do future business with/get another CC with a creditor whom you've got a charge off with, you'd have to pay them back in full."
For this one, if I dont pay them back in full but settle for less amount, and if my spouse has accounts at Navy Federal, would they not allow my spouse to add me as an authorized user, on checking accounts or credit cards ever in the future? So I will never have a chance to be a member of any of the credit cards I didn't pay in full?

I'm not sure what Navy's policy on AUs with prior charge offs that weren't paid in full is. You'd have to call and ask them.

As far as "never having a chance to be a member of any of the credit cards you didn't pay in full," the answer is: it depends. With some issuers, no, you won't be able to. With other issuers, you *may* be able to, but after a very long time (i.e. decades). Even then, some issuers STILL won't let you back in even if paid back in full.

So, that's why I say you should consider paying back creditors in full if you can, particularly those you wish to have a credit card again with in the future.

Re: Pay charged off debt in full or settle for less?

Anonymous — Fri, 09 Jul 2021 17:25:31 GMT

Some banks are very picky if you burn them, some like commedity and capital one will send you offers after you paid or discharge what you owe.

Re: Pay charged off debt in full or settle for less?

icloud987 — Fri, 09 Jul 2021 17:45:27 GMT

Would you say as long as I pay banks back in full one day ,almost all of them might give me a second chance for their credit cards and loans?

Re: Pay charged off debt in full or settle for less?

SouthJamaica — Fri, 09 Jul 2021 19:07:14 GMT

@icloud987 wrote:
Would you say as long as I pay banks back in full one day ,almost all of them might give me a second chance for their credit cards and loans?

No but if you pay them back you have a much better chance of some day getting back into their good graces.

Re: Pay charged off debt in full or settle for less?

icloud987 — Fri, 09 Jul 2021 19:40:53 GMT

I owe most to NFCU . About 27000. It is hard to dertimine if I should manage to pay back in full ,( it is charged off) . If there is no telling they would issue credit cards to me again ? What would you do ? My checking account with them still open.

If they wont issue me a credit card ,but I pay back in full , will they prohibit my SO to add me as AU ? Will they at least consider a secured credit card for me ?

Thanks.

Re: Pay charged off debt in full or settle for less?

OmarGB9 — Sat, 10 Jul 2021 04:04:20 GMT

@icloud987 wrote:
I owe most to NFCU . About 27000. It is hard to dertimine if I should manage to pay back in full ,( it is charged off) . If there is no telling they would issue credit cards to me again ? What would you do ? My checking account with them still open.
If they wont issue me a credit card ,but I pay back in full , will they prohibit my SO to add me as AU ? Will they at least consider a secured credit card for me ?
Thanks.

Again, you'd have to ask about being able to be added on as an AU or not with an outstanding balance. But for sure you won't be able to get your own card with them if you don't pay them back in full. Once you do, Navy is very good about allowing people to get credit products again once they've been made whole. So with Navy there IS telling if they'll let you back in. Can't say the same about other creditors though.