CHARGE OFFS

[BIGREFI]

My question is when paying off old collection accts how do you want them to report this to your credit report? i have heard that some companies will remove completely! but also that can lower your score.

[TheNewWorldMan]

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BIGREFI wrote:

My question is when paying off old collection accts how do you want them to report this to your credit report? i have heard that some companies will remove completely! but also that can lower your score.

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When you pay a collection, the note on the account changes to "paid-charge-off."  This can actually lower your FICO, though the hit is usually short-lived.  However, it won't help your FICO.  Some lenders may view a paid charge-off less unfavorably than unpaid.

The better alternative is to go for a PFD (Pay for Delete), which means that the collection agency agrees to completely remove the file from your credit report.  Get any PFD promises in writing, and read the fine print.  Go for your most recent charge-off first.

[Tuscani]

PFD letter:

http://ficoforums.myfico.com/fico/board/message?board.id=generalcredit&message.id=2659

[mrosania]

Is this a common practice? I would take that route and settle all of my bad debts. How do you ensure that they will do what they say? Collectors are the worst when it comes to trying to really help. Thanks in advnce.

[Tuscani]

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mrosania wrote:

Is this a common practice? I would take that route and settle all of my bad debts. How do you ensure that they will do what they say? Collectors are the worst when it comes to trying to really help. Thanks in advnce.

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I wouldn't say common practice.. but you are educated enough now to know it is an option. Every OC\CA has their only policies about delete after payment.. Presenting the ultimatum that they need to agree to delete before sending payment only motivates them to do so.

[devhip]

Right. And if you manage to negotiate a PFD, make the creditor be very specific with the verbiage when you get it in writing (and of course....it MUST be in writing). By specific, I mean...

* Correct account number and info notated. Make sure it references the original creditor account if a CA and not just their account number.

* "PAID IN FULL", "not subject to further collections", "closed"...are explicitly stated.

* Must state exactly what they will do, i.e., if you pay $XX by XX date they will "remove" (again, use exact verbiage) the account from (name all 3 bureaus by name).

* Dates are noted for both parties to fulfill their end of the bargain.

* Signed and dated by creditor, name and title.

* Send the funds by the agreed method only. And make sure you have absolute proof of time and date sent and received. This is not an area where you want variables.

I mention this stuff out of personal experience. If you get something in writing and it doesn't have all of the info above (all of it), tell them to do it again. And again. Until they get it right. I once had a creditor send 3 versions before I accepted it and sent the funds. They moaned and groaned each time. But in the end it's all about CYA.

Message Edited by devhip on 05-18-2007 09:25 AM

[Tuscani]

Did we mention to get it in writing? Ok good.