Question on raising credit score

[SP33Demon]

My main question is: How much will an account that is reported as "settled" to the credit card companies differ over "paid in full" on an already closed delinquent account (FICO score wise)? My brother had a card that was 60+ days overdue and went to collections, but he paid some money to the them and it's now back to Washington Mutual (original issuer of the card). He wants to pay it off in full, in hopes that they will reopen his account (to help rebuild his credit) but they won't do that. I told him to let it bounce back to collections, and then just settle with them and save his money since his score is already in the dumps from this fiasco. I don't think "settling" will hurt his score *that* much vice paying off the closed account in full, but I could be wrong?

One other option we may try is settling but getting it in writing from the collection agency that the account will still be reported as paid in full. From what I've read, they can basically do anything they want.

Any thoughts on the matter is appreciated.

 

[Mxylplyx]

Your unlikely to get them to mark it as paid in full if you dont pay the full amount.

 

[SP33Demon]

Originally posted by: Mxylplyx
Your unlikely to get them to mark it as paid in full if you dont pay the full amount.

I've actually gotten them to do this in the past. Collection agencies basically purchase these accounts for next to nothing, so they're more willing to negotiate with you than the original creditor. But you just have to make sure you get it in writing that you paid in full (even if your agreement is for less than the full amount), in case you need to dispute it later.

Bump for FICO guru's who may know more about how settling affects your score.

 

[Vic]

If he settles with the collection agency for less than the full amount, it will negatively effect his credit score and there will be a remark on his credit report saying that he did so. It will hurt his ability to re-establish his credit for some time.
How bad compared to paying it off in full is tough to say though, because his credit is already pretty badly damaged with a 90 days late default that went to collection. The only things worse are a public record (bankruptcy, etc.).
I really doubt that they'll say it was paid in full if they settle for less than though. Collection agencies aren't known to be nice like that.

Not much else I can say.

 

[QED]

In my experience, having seen literally hundreds of credit reports, and having worked with Fair Isaac on credit scoring models, the
difference in how it affects your score between an account being labeled "Paid In Full" , "Settled", or "CHARGED OFF" (meaning you
never paid them a dime) is almost negligible for accounts that already have a serious delinquency history.

Paying off an account that has already been written off (and reported as such) is quite unlikely to do much of anything positive for your
credit score. In fact, unless you pay it in full it can have an adverse affect by pushing the "delinquency date" to the date of the settlement--
meaning the delinquency appears more recent that it really has been. This is technically illegal, but I've seen credit card companies and collection
agencies do this thing all the time.

Bottom line is-- don't pay off old charged off debt UNTIL you speak with the credit card company first to find out what (if any) relief that might give with regards to their reporting of your credit history. Most credit card companies will not play this game anymore, but you might get lucky.

Bottom line-- you should pay your old debt back only because you feel morally obligated to, but don't think that it will do anything at all to enhance your credit score. It almost certainly will not.

 

[SP33Demon]

Originally posted by: QED
In my experience, having seen literally hundreds of credit reports, and having worked with Fair Isaac on credit scoring models, the
difference in how it affects your score between an account being labeled "Paid In Full" , "Settled", or "CHARGED OFF" (meaning you
never paid them a dime) is almost negligible for accounts that already have a serious delinquency history.

Paying off an account that has already been written off (and reported as such) is quite unlikely to do much of anything positive for your
credit score. In fact, unless you pay it in full it can have an adverse affect by pushing the "delinquency date" to the date of the settlement--
meaning the delinquency appears more recent that it really has been. This is technically illegal, but I've seen credit card companies and collection
agencies do this thing all the time.

Bottom line is-- don't pay off old charged off debt UNTIL you speak with the credit card company first to find out what (if any) relief that might give with regards to their reporting of your credit history. Most credit card companies will not play this game anymore, but you might get lucky.

Bottom line-- you should pay your old debt back only because you feel morally obligated to, but don't think that it will do anything at all to enhance your credit score. It almost certainly will not.

Regarding what you said (bolded), are you saying I should call them up and ask them if it's possible that if my brother pays the debt in full, can they "rereport" the debt as "paid in full" vice "charged off" (currently)?

Good advice, thanks QED and Vic.

 

[RagingBITCH]

Rob - dood long time no talk. What's been happening with you man?

 

[QED]

Originally posted by: SP33Demon

Originally posted by: QED
In my experience, having seen literally hundreds of credit reports, and having worked with Fair Isaac on credit scoring models, the
difference in how it affects your score between an account being labeled "Paid In Full" , "Settled", or "CHARGED OFF" (meaning you
never paid them a dime) is almost negligible for accounts that already have a serious delinquency history.

Paying off an account that has already been written off (and reported as such) is quite unlikely to do much of anything positive for your
credit score. In fact, unless you pay it in full it can have an adverse affect by pushing the "delinquency date" to the date of the settlement--
meaning the delinquency appears more recent that it really has been. This is technically illegal, but I've seen credit card companies and collection
agencies do this thing all the time.

Bottom line is-- don't pay off old charged off debt UNTIL you speak with the credit card company first to find out what (if any) relief that might give with regards to their reporting of your credit history. Most credit card companies will not play this game anymore, but you might get lucky.

Bottom line-- you should pay your old debt back only because you feel morally obligated to, but don't think that it will do anything at all to enhance your credit score. It almost certainly will not.

Regarding what you said (bolded), are you saying I should call them up and ask them if it's possible that if my brother pays the debt in full, can they "rereport" the debt as "paid in full" vice "charged off" (currently)?

Good advice, thanks QED and Vic.

Going back to what I originally said, it matters little whether the debt is CURRENTLY reported as "Paid in Full" or "Charged Off". What matters more is the HISTORY of the account, so it's far better to see if they can report a charged off account as perhaps only 90-days late, and then "CLOSED BY CONSUMER", or "SETTLED".

Basically, just call them up, tell them you have a limited amount of money to pay off several creditors, and want to do what is best for your credit, and see what (if anything) they offer you. Most likely they will LIE to you and tell you that by simply having the account CURRENTLY reported as "PAID IN FULL" it will magically make your credit better, but stick to your guns and insist you won't pay a cent unless they can offer you something that really will help your credit.

In essence, you are bribing them to lie about your payment history. Credit card companies used to offer these kind of concensions all the time in the past, but it now is technically against most card issuer's written policies (for obvious reasons). That doesn't mean you won't get lucky, though.

Now, as a big final caveat to everything I just said: not paying your charged off debt will have little negative impact on your credit score, but if a prospective lender (like a small mom-and-pop "finance-here" auto dealership) actually reads your report and doesn't just look at the score, it can have an impact and they will almost certainly want to know why you didn't pay off what you owed.

 

[SP33Demon]

Originally posted by: RagingBITCH
Rob - dood long time no talk. What's been happening with you man?

Hey Melvin! Not much, living in DC now. You still powerlifting? I'm more into cardio these days, getting big was too much on the joints.

 

[SP33Demon]

Originally posted by: QED

Originally posted by: SP33Demon

Originally posted by: QED
In my experience, having seen literally hundreds of credit reports, and having worked with Fair Isaac on credit scoring models, the
difference in how it affects your score between an account being labeled "Paid In Full" , "Settled", or "CHARGED OFF" (meaning you
never paid them a dime) is almost negligible for accounts that already have a serious delinquency history.

Paying off an account that has already been written off (and reported as such) is quite unlikely to do much of anything positive for your
credit score. In fact, unless you pay it in full it can have an adverse affect by pushing the "delinquency date" to the date of the settlement--
meaning the delinquency appears more recent that it really has been. This is technically illegal, but I've seen credit card companies and collection
agencies do this thing all the time.

Bottom line is-- don't pay off old charged off debt UNTIL you speak with the credit card company first to find out what (if any) relief that might give with regards to their reporting of your credit history. Most credit card companies will not play this game anymore, but you might get lucky.

Bottom line-- you should pay your old debt back only because you feel morally obligated to, but don't think that it will do anything at all to enhance your credit score. It almost certainly will not.

Regarding what you said (bolded), are you saying I should call them up and ask them if it's possible that if my brother pays the debt in full, can they "rereport" the debt as "paid in full" vice "charged off" (currently)?

Good advice, thanks QED and Vic.

Going back to what I originally said, it matters little whether the debt is CURRENTLY reported as "Paid in Full" or "Charged Off". What matters more is the HISTORY of the account, so it's far better to see if they can report a charged off account as perhaps only 90-days late, and then "CLOSED BY CONSUMER", or "SETTLED".

Basically, just call them up, tell them you have a limited amount of money to pay off several creditors, and want to do what is best for your credit, and see what (if anything) they offer you. Most likely they will LIE to you and tell you that by simply having the account CURRENTLY reported as "PAID IN FULL" it will magically make your credit better, but stick to your guns and insist you won't pay a cent unless they can offer you something that really will help your credit.

In essence, you are bribing them to lie about your payment history. Credit card companies used to offer these kind of concensions all the time in the past, but it now is technically against most card issuer's written policies (for obvious reasons). That doesn't mean you won't get lucky, though.

Now, as a big final caveat to everything I just said: not paying your charged off debt will have little negative impact on your credit score, but if a prospective lender (like a small mom-and-pop "finance-here" auto dealership) actually reads your report and doesn't just look at the score, it can have an impact and they will almost certainly want to know why you didn't pay off what you owed.

Ah, I understand now. I'll check with the original creditor and see what I can do and if they'll bite. It's essentially what I'm trying to get the collection agency do, but at a level "before" it goes to collections since it's with the original creditor. My only concern is, how would you get something like this in writing? Wouldn't you just have to take their word that they would rereport it as something less harmful? It doesn't sound like something you could prove, and then you have gone and paid it off for nothing if they lie and don't hold up their end of the bargain. I guess it's a roll of the dice.

 

[SoulAssassin]

http://www.creditboards.com

 

[alkemyst]

also any shortfalls in balances need to be claimed as income on your taxes.

If you didn't pay in full, it's reported as such. If they settle then in 7 years it will be off. Sometimes though they accept partial payment and keep the account open and in collections. In those cases it can go indefinitely.

I had a $200 collection that wasn't even in my name. It wouldn't go away and was too little to hire an attorney. It was on my credit for 10 years until I bought a house and settled. The way I figure is I got out ahead as $200 today is much less than 10 years ago.

Other than that my credit was perfect so it only affected my mortgage.