May
13
Pinto B asked:
Does it improve my credit if I pay my credit card accounts that are already in collection or no? Or should I just settle it? Does it make my credit score go higher if I pay them?
Does it improve my credit if I pay my credit card accounts that are already in collection or no? Or should I just settle it? Does it make my credit score go higher if I pay them?
I just want to get an idea because I called one of the collection agency for my credit card and they said I could settle the account but it will effect my credit. They said if I pay them monthly and pay the account off it will show on my credit report that I have paid it and will improve my credit rating.
What should I do? Are collection agencies telling me the truth or false? And I owe about $7,000 in credit card debt!
Thank you for your time and effort in answering my question.
Allison
Comments
7 Responses to “Should I settle my credit card accounts or should I just pay them off?”
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Carol
Of course they are not telling the truth.
There is no sense in paying any account that has already gone to collections unless you get a pay for delete agreement.
The damage has already been done and without this agreement you will actually hurt your score if you pay them because the accounts will become current rather then old and you will reset the statute of limitations as well.
Bryan
The collection agency is lying to you. What is reported on the credit report is the balance “owed.” Once you “settle” your debt, the balance owed is $0. Not only should you settle your debt but ask the collection agnecy to grant you a letter that this will not be marked negative once the debt is setttled. Take that letter and dispute it with the credit reporting agencies. Settling and paying in full has no bearing. What is reported on the credit is what you owe. Once you settle, you owe nothing. Make sure to get that letter from the collections. Usually they will give you one and then you can have it removed from your credit.
Also, if you settle, make sure to have it closed under Account paid/closed by customer. Get that in writing too!
Lydia
It is better to pay them off rather than doing settlements. If you do settlements, it reports on credit report as settlement. You also have to pay taxes on the amount that you did not pay per the settlement. Say you have one account that you owe $5000 on–you settle for 50%–you pay $2500. That would leave $2500 not paid. Anything over $599 of the $2500 not paid is reported to Internal Revenue. The IRS does consider this as income, and will send you a 1099 for this. This would occur with each account that is in collections. Whichever you decide to do though, do request a letter from the collection agencies for your own personal file, for your own verification. Good Luck! ***
Sally
at best they are bending the truth a bit — to get rid of the phone calls and other head aches it might be better to settle – since they could take you to court and put a lien on your house or wages!!!
Floyd
They are lying, yes it will show that the account is now paid, but it will still show that the account was in default/collection/write off (negative), so if you can make an agreement with them to delete this account, or mark the account as paid as agree for the settlement amount, then this would be great. Your account is already negative and in default
Darlene
It’s not just the numeric score. Creditors often pull the whole report. This would show them that you finally paid up what you owed, or you walked away from part of it. Which do you want them to see?
Roberta
Paying off debts that are in collections will not improve your score and you will not be able to get the derogatory item removed by getting a letter from the collector saying you paid.
You can try to get a delete for payment agreement but the collection agency can only remove the item they reported. The original creditor’s charge off will remain on your file.
You should negotiate a settlement. The older the debt, the more likely they will settle for less. If the debt is over 3 years old, offer 25%; 2 or 3 years old, offer 50%; less than 2 years old, offer 75%. Lump sum gets the best deals. Payment plans have to be very short term.
Get any settlement agreement in writing and save it, along with your payment proof, forever. Do not give the collector direct access to your bank account.
It is possible that the creditor will send you a 1099 and you will have to report the forgive portion of the debt as income. It is still cheaper to pay the taxes than pay the whole amount.