Settling a debt

[Henchman21]

I would to discuss the consequences of settling collections for full or less than full. I may need to finance a car within a year or two. I also will probably need access to student loans by 2015. Do such lenders typically deny credit if they see you have settled your debts for less instead of paying in full? If so, is it better to have an unpaid collection than paid for less?

I have 10 collections, I think. Most are medical and I believe 8 will fall off by the end of 2014. I should be able to pay most of them by the time but I'm not counting on all being paid, as I'm a poor student.

[guiness56]

No matter how it is paid, FICO doesn't score it any differently.  Settled for less statements look worse on a manual review.

Personally I think  paid or settled is always better than not.

[Henchman21]

When are manual reviews used?

[guiness56]

When your CR is pulled, say for a mortgage.

[Henchman21]

No manual reviews for financing a car? I don't want to ruin my chances

[DiabolicallyRandom]

I believe they can do a manual review if they chose to.  I would assume it to be likely with a car anyways.

[Henchman21]

I would think so, too. I guess I could use my down payment to pay off collections, but then...aargh.

[guiness56]

Any creditor that is considering extending you credit can do a manual review.  I just used a mortgage as an example.

[Henchman21]

I guess at worst, I might get accepted for a horrible APR, and then refinance in a year or so when those collections are gone. A car loan is my goal with this whole rebuilding thing, as my poor 'Yota has over 300k and I'm just waiting for the day...

[guiness56]

Many auto lenders use the Auto Enhanced FICO which is targeted more toward your past relationships with auto loans.  They put more emphasis on those than other things on your CR.

The last auto loan I got was more concerned with a repo I had co-signed on than anything else.

Not saying they won't use them against you but they may not weight their decision on those alone.