What effect does having debts discharged (not through bankruptcy) have onn your score?

[tmacar]

I have about $65K in installment loans, all with balances no lower than their original.  Having paid off very little of yout installment balances hurts your score, although not as badly as too much use of your revolving limits does.  Right now I'm eligible to have all that debt administratively discharged, and will, in fact, eventually have to do just that.  When I do, the total amount discharged will become income for tax purposes, but that's a different problem.

If I have them all discharged what, if any, effect will it have on my FICO scores?

[SouthJamaica]

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@tmacar wrote:

I have about $65K in installment loans, all with balances no lower than their original.  Having paid off very little of yout installment balances hurts your score, although not as badly as too much use of your revolving limits does.  Right now I'm eligible to have all that debt administratively discharged, and will, in fact, eventually have to do just that.  When I do, the total amount discharged will become income for tax purposes, but that's a different problem.

If I have them all discharged what, if any, effect will it have on my FICO scores?

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I don't think you're using the right terminology; 'discharge' is only in bankruptcy.

If you mean the debts are being forgiven as a settlement, the answer is that the lenders will probably treat the transactions as writeoffs, which will be bad for your credit.

[tmacar]

Nope.  To most of the world, I suppose, "forgiven" is the term.  But for student loans, it's "discharged".  In this case it would be due to permanent disability, which is about the only wat it can be done.  Some student loan paynent plans do forgive the ramainder after some specifuic number of years of payments, but this is wiping out the whole thing, and they call it discharged..

And there will be no settlements involved.  As a matter of federal law, if someone with student loan debt becomes totally and permanently disabled, all student loan debts are discharged.  Not "written off", just wiped out.  The only problem lies in proving total and permanent disability to them which, in my case, is not in fact any kind of a problem at all.  I have exactly the specific documentation which they accept without any review or decision making involved.

[RobertEG]

I would presume that discharge of the debt due to cancellation by the creditor would have the same scoring effect as having paid the loan, as the result is a debt balance of $0.

[tmacar]

It'd reduce my total installment debt, including the mortgage,  by abvout 29%, so I wonder if thast'd have any effect at all.  It would change my average of how much of the installment debts have I paid down, but by such a small amount I doubt that part would matter at all.  All the other installment loand, except the mportgage, are  less than 18 months old, so not much has been paid down and the mortgage is only about 3% paid down.