Better to settle with Citi or charge off??

[Anonymous]

So I have two delinquent accounts with Citibank due to a long stretch of unemployment I am still trying to break. One is already "charged off" to their internal recovery section. One is delinquent but on the verge of being charged off (180 days past due). I may regain income here this month.

Citi has offered me two options on the account that is only delinquent and not in recovery. One is to settle for 45% of the balance ($400 or so) and one is a payment plan to repay in full at 9.9% interest. I'm not really interested in that because I have a card with USAA with a similar interest rate that I have kept up to date and fully functioning and if anything I can just pay the USAA card down and transfer the balance there to pay off without the red tape of the payment plan. The settlement is attractive to me but I want to know if there is going to be any tangible difference at this point as far as my credit score/history and my relationship with citi (I'd like to be able to get another card again someday) if I just let the account go to recovery rather than try to settle. This is keeping in mind that one account already got charged off which I wasn't expecting. What will they report differently to the credit bureaus? Is there a big difference between "charged off" and "closed with balance not paid in full" or whatever? Does anyone have any experience with Citi in this regard?

Thank you.

[Anonymous]

People with much more expertise than me will chime in if I'm wrong, but I would do anything in my power to avoid a charge-off.  I would opt for the pay plan, no matter how painful, because COs are the most derogatory account status available for revolving credit accounts.  Experiencing what I have because of poor credit, the value of having good credit is absolutely priceless.  Because of the seriousness of the CO derogatory on your CR, I would therefore go on the pay plan.  To me, the pivotal inquiry has nothing to do with whether or not I need the CL now.  It may be awhile before you even get one of any amount if it charges off.  My two cents.

[Anonymous]

Sure, but I won't really be in a position to need credit voluntarily for some time, maybe even a decade and the charge off status will eventually come off of the report. The payment plan, on the other hand, will continue to report the entire balance as unpaid and delinquent until I pay down the account in full. That could take months or years. It really doesn't sound like all that great of a deal to me. But, I appreciate your concern for my situation. Once I have a job I want to post with more information about my predicament, but without income there is only so much I can do at this point.

[Anonymous]

Also, don’t forget that a charge-off in no way relieves you of responsibility for that debt. A charge-off is nothing more than an accounting method for the lender’s books.

If it does go to a charge-off status, both the in-house recovery team and third party collection agencies can continue collection efforts up to, and including, attempting to obtain judgements.

Best of luck to you.