Please Help. What should we do? Pay or not ?

[HucksMomma]

We have been working on my husbands credit for 2 years now. We have gone from a 407 to a 644. We have a 10K camper loan thru a finance company that is at 23% interest. We went to our Credit Union to see about trying to  refi the camper loan. They are willing to refi the loan but said we  need to settle two old outstanding debts before they will fo it.

These are the 2 debts

Discover $2500.00 DOFD 3/2008 drops off 3/2015

Electric Company Collection account  $1263.00 drops off 10/2014

My issue is they require a 640 score to do the loan, We can not afford to PFD on the Discover and the Electric Company does not settle accounts. Discover has offered to take $689.00 to settle the account but wont it hurt the credit score more if we settle the account ? Then the score will be below the 640... so we are in a catch 22

Should we pay them or leave them and let them just drop off? 

The payment on the camper is well within our budget i just hate knowing we are paying that much in interest  We can wait till next yr to refi...

[KittySaysMeow]

How are these currently listed on your credit report? If they are charge offs, then a charge off is theoretically scored identically to a settlement.

I heavily debated doing this myself. I had multiple charge offs and collection accounts, paid all but the largest. Scores went up. I recently just settled the largest. I expect a small dip at first, but in the long run it will be better.

[HucksMomma]

They are both charge offs.

[policebox]

Did you ever do a debt validation for the electric company collection? You might consider that, as it could make it go away without you paying anything.

As for Discover, are you outside of the SOL for being sued? Have you been sued over it previously? If not, then you have more options. You can wait it out until it drops off your report. You could try disputing it to see if you could get it off early, if there are any errors in the reporting of the tradeline. Otherwise it depends on how much you want to pay. If you are willing to shell out some money to get it settled for less, then you could consider that option. If the credit union just wants to see that the debt is settled, even if it's for less, then does your actual score matter? Settling a charge-off won't improve your score any; only having it deleted will.

[HucksMomma]

Discover is beyond SOL. Never been sued. I have disputed both a couple times & both come back verified. My logic is am I going to pay more than 2k in interest for the next 12 mo on the camper loan or I could leave the electric bill alone, settle with discover and refi in Oct...... decisions decisions.....

[polno1234]

you half answered right there. ask for an amortiztion table from your current loan company and your bank for the new loan.  add the cost of settling discover ( score shouldn't drop from settling but there is a very small chance it might for some odd reason cause credit models are wierd) to the interest of the refi and then subtract that from the rest of the interest you would pay on the original loan. if it will save you money it is worth it IMHO.

[Melanie220]

I settled a cc with FPB last year and my score increased. The CO was factored into my UTI so by paying it off my UTI went from over 100% to 0. If Discover is reporting a balance on the CO then you may have results similar to mine

[buildafico]

I doubt you'll pay $1800 of interest between now and october. lol so I would refinance then, and settle discover. Just be aware that if you settle with discover you will most likely get taxed on the debt they've forgiven.