topic Re: Settling collections in Rebuilding Your Credit

Settling collections

Brianna512 — Tue, 27 Jun 2023 16:21:53 GMT

I have a collection with enhanced recovery for an old sprint where I owe 893. It will settle for 223. I'm trying to pay collections and build credit so can buy a house next year. They won't do a pay for delete my question is will settling hurt my credit or raise it? And how will lenders look at that? I was just told to pay collections but not if settling is ok.

Re: Settling collections

coldworld — Tue, 27 Jun 2023 16:45:11 GMT

@Brianna512 wrote:
I have a collection with enhanced recovery for an old sprint where I owe 893. It will settle for 223. I'm trying to pay collections and build credit so can buy a house next year. They won't do a pay for delete my question is will settling hurt my credit or raise it? And how will lenders look at that? I was just told to pay collections but not if settling is ok.

How old is the debt? Have called back and offered to PIF for deletion? What is stopping you from paying the full amount?

Settling the debt won't raise your score. If an underwriter has to see a collection, one paid in full will likely be more favorable than a settled collection account. I'd also do a search here for that CA. I'm sure there's some info about them.

Re: Settling collections

Brianna512 — Tue, 27 Jun 2023 16:47:37 GMT

The debt is from 2020. I did ask about PIF for delete they said no. I was going to settle as I have multiple collections and would be able to use that towards paying others. Is settling not a good idea?

Re: Settling collections

coldworld — Tue, 27 Jun 2023 16:54:20 GMT

@Brianna512 wrote:
The debt is from 2020. I did ask about PIF for delete they said no. I was going to settle as I have multiple collections and would be able to use that towards paying others. Is settling not a good idea?

I wouldn't close the door on the PFD option with them. I did a quick search here, and found several cases of people negioating PFD with Ehanced Recovery. Due to the recency of the collection account, it may be worth it to keep pushing.

In my experience paying collections in full has worked out better for me, but there are far more experienced people here that can chime in on that.

Re: Settling collections

Brianna512 — Tue, 27 Jun 2023 16:55:32 GMT

Thanks I'll try again when I searched I saw more they wouldn't but original creditor recalled

Re: Settling collections

FireMedic1 — Tue, 27 Jun 2023 20:29:40 GMT

You can try and call T-Mobile and ask id they will recall the debt if they will take payment. Old days Sprint used to it it frequently.

Re: Settling collections

MeredithLepore — Fri, 30 Jun 2023 11:57:44 GMT

One potential con to settling the debt is paying income taxes on the amount you don't have to pay. You could also pay in full and then ask for a goodwill deletion on your report - this option won't be available to you if you settle.

Re: Settling collections

FireMedic1 — Fri, 30 Jun 2023 21:23:48 GMT

@MeredithLepore wrote:
One potential con to settling the debt is paying income taxes on the amount you don't have to pay. You could also pay in full and then ask for a goodwill deletion on your report - this option won't be available to you if you settle.

@MeredithLepore

The IRS will only get involved if the debt collector has discharged or forgiven your debt. Paying a agreed settlement amount you dont have to pay taxes. Charge offs fall under this when its written off. Theres no con.

Re: Settling collections

tnhomestead — Fri, 30 Jun 2023 16:11:33 GMT

Settle it. That stops it from updating and will help improve your score. Now if you can do pff, great. But if you want mortgage down the road, you need it settled anyway and a year old paid collection is better than a day old one! Also it will help your utilization a bit. Will it be a drastic improvement? Probably not. But it will improve over time if it's paid.

Re: Settling collections

MeredithLepore — Tue, 04 Jul 2023 12:11:47 GMT

Oh, thanks for pointing this out!