To settle or not to settle . . .

[Anonymous]

I recently started working after several months of being unemployed. I've already put many of my credit cards on 60-month hardship repayment plans.

My $10,000 Citibank credit card debt is now being handled by Alltran collection agency (a.k.a. URS). They say it's in pre-charge-off status, and still owned by Citibank. Then they offered to settle for 50% – which sounds like an attractive option to me, even with the damage to my credit report. Of course, I'd get the offer in writing first.

So that got me thinking: If my credit report will be damaged anyway, maybe I should wait for my $12,000 Bank of America debt to go to collections, and settle that too. Is there any more credit score damage for 2 settlements than 1? My credit score is already down to 433. Am I overlooking anything? (I figure I can use debit cards for purchases, and I've never financed cars. I'm aware that I'll be taxed on the settled amount.)

Thank you for any advice you can offer.

[Brooklyn2018]

You do not want to wait for BofA to goto collections. Then you’ll have 2 derogs on your credit report and it can present more of a problem trying to have the CA removed later on...and you will see a drop in score as another collection reporting. Settle with them before it goes to collections.

Welcome to MyFICO Forums!👍

😊

[Anonymous]

Brooklyn,

Thank you for your reply.

You said I don't want 2 derogs on my credit report. The part that I'm still not clear on is: Why not?

I don't mean to sound obtuse or immature (even though I've made some stupid financial decisions), but I'm still eating, still living in my apartment, still getting a paycheck, and my car still runs.

I know that this will mean no credit cards, loans, mortgages, car financing, and difficulty renting an apartment. I just don't see how any of those are essential right now.

Admittedly, I've never been down this road. So maybe I don't know what I don't know.

Thank you again for your advice.

[Brooklyn2018]

When the new CA reports it’ll reportfor another 7-7.5 yrs and that’ll just extend your attempts to rebuild once everything is settled, if that IS in fact plan to do in the future?

[Brooklyn2018]

You can still settle with BofA(possibly) and not have another derog report. You asked for what would be best(in a nutshell) and settling for less with them(not sure if they’ll PFD?) would be best and having another CA added to your credit report is not the best idea, IMHO.

Maybe others can see the method to your madness?😂

Good Luck!👍

😊

[Anonymous]

Brooklyn,

Thank you for clarifying. I understand now why you're saying dealing with Bank of America is the better option.

A couple more questions:
As I said, the Citibank debt is in "pre-charge-off" status with Alltran collection agency, but still owned by Citibank. Does that already count as a derog? If I settle for 50%, will that count as a derog? If I pay Alltran the full amount, will it be better for my credit score?

Thank you again.

[Brooklyn2018]

If the CA is not reporting the collection on your credit report yet(?) then you could contact the CA and offer a “pay for not reporting” and see if they’ll bite? If it is reporting then it most certainly is a derog, and counts against you scores. If you settle on any account at any %(other than a PFD) it will report as such...”paid/settle for less” or another type of verbiage. This will still be a derog but, it will have been paid and the monthly reporting will cease and the collection will age and will have less effect years down the road. During which time, you can start a GW(Goodwill) Letter campaign to try and have the paid collection removed...it’s a shot in the dark but, never hurts to try. You can search GW Saturation Technique here on MyFICO.

Hope that helps some?

😊

[Anonymous]

Brooklyn,

Yes, that definitely helps.  Thank you again for all the information.  I'm still leaning toward settling with Citibank, but I'll definitely call Bank of America before it goes to collections.  I appreciate all of your advice.

[Brooklyn2018]

You are very welcome! Best of luck to you.👍