settlement?

[Anonymous]

i have 4 credit cards that charged off in 2006. i have 2 medical debts also. all of these are in collections. i am wondering should i "settle" these for a smaller payoff amount? if i do that will it help my credit score? or should i pay the amounts in full? which way gets a better score? thanks for anyone willing to answer my questions.

[llecs]

If CAs are reporting these debts, then paying or settling them will drop your FICO score.

I'd suggest reading the following:

Common Abbreviations

Credit Scoring 101 - great for knowing what is in your credit score and to see how your score is impacted.

and What Steps Do I Take - great for learning the repair process.

[Anonymous]

I paid my medical debts in full and they were removed from my credit report within a few months.  I also settled two CC's (CA's would not agree to PFD).  I have one outstanding CO (my lender got the CA's TL removed).  The result was that, even though I never accomplished a PFD, my credit score rose from the low 600's to the low 700's in about 18 months.

I don't believe that the two TL's I settled dropped my score by more than 10 points each (for a short time).  I think that the impact on your score has to do with what bucket you are in and whether you have other TL's reporting positive information every month.  The sooner you get started the better, because the aging process heals all wounds.

Good luck!

[Anonymous]

i am so overwhelmed by all this stuff but if i am understanding this right, either way i go (settle or pay in full) wont matter much because they are all charged off (credit cards) and in collections (credit cards and medical debt) right?

also if i do settlements with all of this, do i just ask them on the phone to do a PFD?

thank you so much for helping me to figure all this out!

[corkyduckfan]

From a FICO score standpoint, it may not mean that much.  But if you are going to ever try to buy a home in the future and used manual underwriting instead of just relying on your score, then it makes a big difference.  I am in the process of working with a non-profit agency to buy my first home and I am going to use a manual underwriter with a FHA loan and paying things you owe to a zero balance DOES matter to them.  It shows that you are trying to pay things that you owe and are now responsible.  FHA underwriting relies more heavily on what you have done the last 2 or 3 years.  Getting a PFD is preferrable, but paying of a debt to a zero balance is also a good thing.

[llecs]

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stephs987 wrote:

i am so overwhelmed by all this stuff but if i am understanding this right, either way i go (settle or pay in full) wont matter much because they are all charged off (credit cards) and in collections (credit cards and medical debt) right?

also if i do settlements with all of this, do i just ask them on the phone to do a PFD?

thank you so much for helping me to figure all this out!

---

Never ever call a CA. Never. Their word is never their bond. And never ask for a PFD over the phone. All PFDs must be in writing, otherwise it is your word against theirs and theirs always wins. 

The link below will tell you what to do:

What Steps Do I Take

Paying off CC COs could improve your score if they are factored into util, but they would have to be the ones reporting. If any of these CCs are younger than your AAoA, then send a PFD. If older than your AAoA, either pay and GW later or modify your PFD to ask them to remove any baddies like "CO" or lates.

For your CAs, the only way to handle it is to follow the HIPAA process if medical. If non-medical, send a DV then offer a PFD if they verify.