FICO 9 settlements?

[Anonymous]

I have been searching and have yet to find current or complete information so far. Most information is dated and Im hopin to get some clarification.

My Question: How does FICO 9 treat settled accounts. I have read many different opinions on this but like i mentioned earlier, it was all dated info. My story is not the purpose of this post, but the information regarding the settlement of accounts and FICO 9 is much needed in the community.

My story: Currently I have mutliple medical collections, so Fico 9 is very improtant to me. I have 2 other accounts Im focusing on at the moment. The first is a closed Kohl's account of $577 that, according to FICO, is being factored into my credit utilization. The second is a Cavalry collections account for $580. I can afford to pay one account in full or settle at 60% on both. 

[SouthJamaica]

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@Anonymous wrote:

I have been searching and have yet to find current or complete information so far. Most information is dated and Im hopin to get some clarification.

My Question: How does FICO 9 treat settled accounts. I have read many different opinions on this but like i mentioned earlier, it was all dated info. My story is not the purpose of this post, but the information regarding the settlement of accounts and FICO 9 is much needed in the community.

My story: Currently I have mutliple medical collections, so Fico 9 is very improtant to me. I have 2 other accounts Im focusing on at the moment. The first is a closed Kohl's account of $577 that, according to FICO, is being factored into my credit utilization. The second is a Cavalry collections account for $580. I can afford to pay one account in full or settle at 60% on both. 

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Don't settle any accounts. Just pay them in full. Any 'settlement' runs the risk of screwing your credit reports up for years.

[Revelate]

Not sure if we've see anything so far on that: FICO 9 is still pretty new (especially with monitoring services) and so there isn't a lot of information on specific things like settlements.

My guess is it probably will be similar to prior FICO models (which is to say, suboptimal) but I really don't know.  A lot of things have gotten looser because the lenders frankly stopped caring about them, it's possible these went that way similarly.

[Anonymous]

Of course that is what im afraid of. I read specifically somewhere that "settled and paid collections are ignored". Of course, what is said on a random website is not justification if it does screw me over.

[Revelate]

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@Anonymous wrote:

Of course that is what im afraid of. I read specifically somewhere that "settled and paid collections are ignored". Of course, what is said on a random website is not justification if it does screw me over.

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What's your income like?  $1K in the grand scheme of things isn't a massive amount of money, especially if you already have $600 and just need 400 more to pay them both off completely.

I'm not sure I'd risk a 7 year substantial derogatory over $400 personally, and remember FICO 9 is only just now making some inroads on some lenders, there's no guaruntee it's going to be the dominant scoring model used for anything going forward so I wouldn't make decisions based on it specifically.

[Anonymous]

Good point.... maybe ill pay off the one that is being treated as revolving debt. Then work on the other one...Also we are a chevy family and GM Financial uses fico 9 as well as the penn fed route...thats our ray of sunshine when the time comes.
BUT: If anyone finds a concrete answer, im sure the community would love to see it. Ive been snooping around here for about a year and ive learned alot here...I just became a member today!

[Anonymous]

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@Anonymous wrote:

Of course that is what im afraid of. I read specifically somewhere that "settled and paid collections are ignored". Of course, what is said on a random website is not justification if it does screw me over.

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Many pieces have been writter about the new features of FICO 9, compared with FICO 8.  I have not seen any that claim that settled collections are ignored.  This piece by Forbes is typical, which uses the phrase paid in full :

Paid Collections

A second significant change with FICO 9 is the score's treatment of paid collections. When a debt is sent to collections, it understandably hurts a consumer's credit score. The new credit score formula, however, disregards any collection matters that the consumer has paid in full.

The other thing to consider (if you are thinking about FICO 9 chiefly) is that FICO 9 softens the impact of unpaid medical bills.  That's also discussed in the Forbes piece.

My feeling is that you should either...

Pay In Full.  But if you are doing that, then hold out until you get the holder of the debt to agree to delete it altogether from your reports.  This arrangement is called Pay For Delete and it will be a win regardless of what FICO model we are talking about: FICO 9, FICO 8, the FICO mortgage models, etc.

Not Pay It At All.  FICO 9 will soften the harm that your medical collections are doing to your score because it is a medical debt.

Paying part of it seems like a losing choice financially and in terms of credit scoring.

It's also unclear how much benefit that even a Pay For Delete gets you if you are still have some collections on your report.  I.e. if you have five collections and pay two in full and get them deleted, your score may not change much.  Derog strategies that involve shelling out money are good but are probably best only if you can see a way to get all derogs of a certain severity removed.  That's just my take... I am no expert in this area.

[Anonymous]

Unfortunately, these are not medical accounts that im referring to, also neither company will do a PFD. I agree that paying in full may be the best option for one of the accounts, not sure about the collections account.

[SouthJamaica]

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@Anonymous wrote:
Unfortunately, these are not medical accounts that im referring to, also neither company will do a PFD. I agree that paying in full may be the best option for one of the accounts, not sure about the collections account.

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Paying in full is always the best option. You don't want 'chargeoffs' or other negative connotations.

Also, btw, the written off amount may be treated as income on which you'd have to pay income tax.

[AndySoCal]

I would agree with the advice of not settling an account. Is the medical collection a debt that has been assigned to the collection agency or sold. Check with the original creditor please. If is is assigned see if you pay them in full if the original creditor will recall the account from collection or have the collection agency delete the reporting of it. The Kohls account pay in full when the funds become availible.