Will settling a credit card debt hurt your credit?

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The first step that most U.S. banks require to begin the settlement negotiation process is that the customer must be delinquent in his or her monthly payments. So, initially, yes is the answer, as missing monthly payments will reduce your credit score. The longer the payments are missed, the more the score will drop.
However, once you reach a negotiated settlement, the bank will report to the credit bureaus that the account is "paid, settled for less than amount owed." While this doesn't rate your score as high as an "account paid in full" note, you will actually see a rebound in your credit score as accounts are settled because a settled account, even if for less than the total originally owed, is better than an outstanding or delinquent account.

Lastly, if you are considering debt settlement as an option, a better question to ask isn't simply, "Will is lower my credit score," but rather, "Is it worth lowering my credit score to settle the account." If you have a significant amount of debt and know you can save 'thousands' or 'tens of thousands' of dollars through a settlement, it may be worth the extra few points in interest you might pay on a new loan to settle your delinquent debt.

You want the item on the credit report to state, Paid. Do not accept anything less.
Actually, it would be better if you could get them to delete the item when you pay it off. Send them a 'pay for delete' letter via certified mail. If they agree, make sure you have it in writing. I also suggest you offer less than is owed, 35 - 50% of total debt.

Know that your credit scores are marked according to the age of the history. If you are wanting to fix your credit score for a possible loan, do not pay on anything over two years inactive. Doing this will bring the account current and negatively affect your credit score more. If you are looking for long term credit repair (not a loan soon) than pay the charged off account off. There are three main credit bureaus -- Transunion, Experian, and Equifax -- and that they give you a grade on your credit-worthiness according to what your creditors report to them. While each of these three bureaus may have some small variables that differentiate their scoring, the FICO scoring model is still the heart. FICO stands for Fair, Isaac and Company, the group that designed the model. Here is how they say the score breaks down:
  • 35% - payment history
  • 30% - amounts owed
  • 15% - length of credit history
  • 10% - types of credit
  • 10% - new credit

Getting a credit report is quite simple, but getting your credit score can be much trickier. Make sure any company you pay to send you your credit report is also sending you the credit score, so you know the exact number that lenders are receiving. (Most companies will charge extra to show you the scores.) Credit.com is one place that will send you a credit report and your credit score for free -- but you have to remember to cancel your membership within their 30-day period, and you only receive one of the three bureau's reports. Credit Resource Corp. refers their clients to an Annual Credit Watch Program that will give you 24/7 access to your updated credit reports and credit scores from all three bureaus without causing a HARD INQUIRY. Most delinquencies aren't reported to the credit bureaus until after they are 30 days late. This allows for a small grace period - which is supremely helpful to folks who aren't adept at organization. What's valuable to know is that delinquencies which occurred within the past 2 years are of greater weight than older items. That means that if you see an item sent to collections, it might actually hurt you to pay it off during the loan process if it's more than two years old. Why? Because paying collections will decrease the credit score due to the date of last activity becoming recent. But if you do decide to pay off a collection, MAKE SURE that the creditor gives you a letter of deletion first. If, however, you have any recent accounts with past-due amounts, paying them off immediately will help your credit score. Again, if you do decide to pay off a collection, MAKE SURE that the creditor gives you a letter of deletion first.
Here are more opinions and answers:
  • Yes, it could. Although credit card companies may encourage you to settle your debt with the help of a credit counseling service or a debt repayment plan, as an alternative to bankruptcy (where they may get nothing), this step would still become part of your credit history. According to the FTC, "the use of debt counseling may appear on your credit report. Some creditors consider this activity negatively; some may consider it as a positive step."
  • In addition to the above, Creditors will sometimes offer you a straight settlement through their collections department (I know, I used to be a collector) and I strongly advise you to NOT TAKE IT. Although it may sound nice to give them a one time payment and be done with it, the debt will show on your credit report as SETTLED. Other lenders will look at that and not be as willing to lend you money down the line (or an apartment, job in finance, etc.) for fear that you will not be willing to repay the full amount you owe them. Credit Management however is only a temporary mark on your credit. As soon as you are done with the program, the mark falls off. Most Credit Management companies will have you sign an agreement that you will not open any more lines of credit or loans while on their program anyway though, so it isn't that big of a deal. No one will be looking at you.
  • Relax. Two years from now (2009) greater than 40% of the population will have poor credit scores based on todays credit rating system. This means that the banks will be forced to lower their credit rating standards if they want to obtain new business (lending). Considering that it is the banks who first created the profitable cycle (for them) of organized periods of boom then bust at the expense of Joe citizen, it would be a moral hazard for you to pay them anything. The banks have avoided any recent possible losses by raping the U.S. treasury, your money, and now they want you to continue paying them. This is double dipping. Go ahead and forsake your credit score today because the system will change and in two years you will be allowed credit again.
  • Yes, almost anything will for a short time. Your score moves up and down like a
    merry go round. But if you follow the advice above it will bounce back quickly.
    EX- I charged 10.000 in June on a card but paid it in full ex for 5.00 in July, my score went from 748 in June to 720 in July and the to 740 in august.
  • Find financial consultation for free, there are many financial institutions that provides consultation for free. Try visiting totaldebtservices.com
329 people found this useful

Can you sue your credit cards to get out of debt?

To have any chance of winning a lawsuit there needs to be legal precedence and substantiated evidence. Regarding suing a creditor the consumer would need to prove fraud and/or antitrust violation, bait and switch tactics, breach of contract and so on. The clerk of the circuit or district court (depe ( Full Answer )

How do you settle a old credit card debt you are being sued for?

First the debtor should determine if the debt is valid. All states have SOL concerning creditor debt where the time limit is set for a creditor to pursue litigation to recover monies owed.. If the SOL defense does not apply and the debt is valid the debtor can attempt to negotiate with the creditor ( Full Answer )

How do you settle credit card debt?

You send settlement letters to your creditors, and after a few rounds of negotiating, hopefully you and your creditors will settle on an acceptable amount. You may do the settling yourself, or you may hire a company to negotiate on your behalf. If you settle on your own, you may save a few thousa ( Full Answer )

How is date of last activity defined for a settled credit card debt?

Answer . The date of last activity for a settled credit card debt is the date that the settlement check cleared your financial institution and was posted to that credit card account. As the account was settled, there would be no more activity on that account. I hope that you have a letter from ( Full Answer )

How do you get out of credit card debt?

The best way to get out of credit card debt is to pay-off your debt. If you can't do so, then making larger than the minimum required payments would be the next best thing. If you are making minimum payments, then there's a few things you can do. First, you can validate your debt. This means t ( Full Answer )

Will debt counseling hurt your credit?

Getting debt counseling is a good thing and shows your willingness to take care of your debt in a responsible way. If you are undergoing debt counseling, a notation to that effect may be appear on your credit report. This does not affect your credit score but how each creditor views this notation, d ( Full Answer )

How do you get rid of credit card debt?

Our family followed Dave Ramsey's Financial Peace University plan to eliminate all debt except our mortgage (which we are now working on), in less than two years. We cancelled all our credit cards, and now use cash, check or debit cards. He says to take the smallest credit card debt and eliminate it ( Full Answer )

How will settling credit card debt affect your credit score?

It will raise your score slightly. If you don't settle a delinquent account, the verbage on your credit report may read: "collection account", or "unpaid collection account". However, if you settle, the report may read "settled". By settling with the debt collector, you have made an attempt to fulfi ( Full Answer )

Who is responsible for credit card debt?

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What is credit card debt?

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How do you answer a summons for a credit card debt?

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What is the average credit card debt?

In our area, I believe the average credit card debt to be about $2000.00 I know that sounds small, but we are a lot smarter than most Americans here.. In our area, I believe the average credit card debt to be about $2000.00 I know that sounds small, but we are a lot smarter than most Americans here ( Full Answer )

Can you still settle a debt with the credit card company after a charge off?

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Is credit card debt a crime?

No , credit card debt is a unsecured debt. Unsecured debt refers to any type of debt or general obligation that is not collateralized. Hope this helps, My Plastic Wallet www.myplasticwallet.com

How do settle credit card debt?

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Credit card debts in estate?

The estate has to pay all of the debts, including credit cards, if possible. If the estate doesn't have the assets to do so, they distribute as best they can. If the court signs off on the distribution, the debts are ended.

How can credit card debt be settled for less than owed?

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Can you get a credit card if you have an outstanding debt?

Tarhaka Archives Master Library And debt elimination system All new info have been added to the Archives under Militia bannerlink , The Moorish American Government, and Oath of Officevalidation link and other places we will be adding our new videoline up soon. We have just added the entire Blacks La ( Full Answer )

How do you get rid of your credit card debts?

It depends. Obviously the best method is to pay them off completely. If you can't do this, then try to make as large payments as possible- much higher than the minimum payment. If you can only make the minimum payment, or are struggling to do so, realize one fact: if you have $10,000 of credit ca ( Full Answer )

Can a person settle their credit card debts without filing bankruptcy?

You can try, and there are a lot of scam artists that claim to guarantee you will. The truth is, most credit card companies will not agree to take less, and those that do may lull you into thinking you're safe, especially if you use a debt consolidation "service." In a bankruptcy, every creditor get ( Full Answer )

How do you avoid your credit card debt?

If your trying to avoid paying your credit card debt, please keep in mind that there may be negative consequences. Creditors are multi-billion corporations. They are staffed with 100's of attorneys, and most likely they won't sit back and do nothing. First, they will send you letters reminding yo ( Full Answer )

How do you deal with credit card debt?

It depends how much debt , and how much disposable income (spending money) that you have. If you are able to make higher than the minimum payment, then do so. this will decrease the principle balance. On the other hand, if you are making minimum payments, or you are struggling to do so, then you ( Full Answer )

Do you pay on debt with credit cards?

no you go into a deeper debt with credit cards. creadit cards are not money. you BORROW the money and they want it back really quick.

Will settling a credit card hurt your credit score?

Well, I would imagin that ANY positive action would be favorable yo NO action.. A settelment my not look as good as 'Paid in Full", but "Paid as agreed" sure beats an open collection account.

Can you be sued from a credit card debt?

Yes. It's possible, but unlikely. When a debtor doesn't make a payment between 4-6 months, the creditor must make a decision. But keep in mind that credit card debt is unsecured, meaning that the creditor has no collateral as security for the loan. They have several alternatives: 1) they can do n ( Full Answer )

Does credit card debt expire?

Credit card debt does not expire. If collection for the debt becomes a liability, then the creditor can write off the debt as a total loss or warrant a reposession of property, but the debt itself will never expire on its own.

Better to pay in full or settle a credit card debt?

In most cases, it is always better to pay the credit card off in full because the payoff is best for your credit rating. If you are able to settle the debt with an agreement that states that the credit card company will not send an adverse action transaction (e.g., chargeoff, workout, etc.) to the ( Full Answer )

How do you beat a credit card debt?

Pay up ! It's customers who default on their debt that pushes up the interest rates for the responsible customers ! Why should we pay for your incompetence !

How do you settle debt with credit card?

Debt CAN be settled with credit card debt and other unsecured debts. Negotiating a settlement is between you and your creditor and settlements have happened for millions of people and helped them get out of debt.

What is more credit damaging Bankruptcy or settling a credit card debt?

Bankruptcy would be more credit damaging than just having large credit card debt, mainly because it stays on your credit report for longer. One of the biggest disadvantages of filing for bankruptcy is the lasting effect it has on your credit report- typically staying on your report for 7-10 years. W ( Full Answer )

If in credit card debt what should you do?

First of all, stop spending. Try to negotiate with the lender(s) of the cards. Call them up individually and tell them that you can no longer afford the minimum due each month (if too high). Some are willing to lower your interest rates and ask you to send in something smaller for a certain period o ( Full Answer )

Is credit card debt down?

No. Because of the bad economy, high prices, poor prospects for the future, downward slide of the stock market, and a rising national debt; the overall credit card debt is up and rising. As long as the economy is poor and does not look good for the future, credit card debt will increase. People are ( Full Answer )

What do I do to get out of my credit card debt?

In order to get out of your credit card debt you must start to pay off your debt and this can be acheived by budgeting rather harshly. The quicker you save, the quicker your debt will be wiped out.

How can credit card debt be reduced?

Firstly, credit card debt can be avoid by paying you credit card bills in a timely manner, avoid late fees and high interest. Creating a budget, no longer using credit cards, and paying your current credit bills will help reduce your debt.

What is the definition of credit card debt?

Credit card debt occurs when a consumer uses their credit card in excess and are unable to pay the bill. Often times the consumers has more than one credit card and they use them all and get into more debt.

Will settling a close credit card debt hurt your credit?

it would really depend on the age of the debt, if it is more than 6 months, leave it alone. By settling it it becomes current news not old and forgotten. It will make you feel better about paying your debts but will actually harm your credit score. You'll sleep better at night but your credit wo ( Full Answer )

How do you pay of credit card debt?

The best way of approaching credit card debt is by consolidating all your credit card debt (assuming you have more than one credit card) into one account. This will obviously need to be approved by your creditors before you can follow this approach. This makes it much easier to manage payments as yo ( Full Answer )

Can you use your debt card as credit?

No - a debit card and a credit card are two entirely different methods of payment. With a credit card, any purchases are immediately paid for by the card issuer to the retailer (assuming you're within your credit limit) - and the issuer charges you monthly interest on the outstanding balance unt ( Full Answer )

What are some tips to settle Credit Card debt?

The first tip to settle credit card debt is to stop using it completely, using only cash for all purchases. The second tip is to pay more than the minimum amount so that part of the principal balance is repaid with less interest accruing for the following month.

How can one be settling credit card debt in the US?

You can settle a credit card debt in a number of ways. You can pay by cash over the counter at your local branch, you can settle the bill by wire transfer or internet transfer, or you can write a check.

What is credit card debt negotiation for?

Credit card debt negotiation can be used to dispute any unauthorized fees and charges. It can also be used to negotiate terms (such as interest fees, late payments) and lower one's assumed debt.

What is the law for credit card debt?

In the US there are several laws governing credit card debt. Some of the more interesting include that it is unsecured debt so that it may be discharged in bankruptcy, that you must be given an interest free payment window for purchases, and that a card holder's liability is capped at $50 USD for a ( Full Answer )

What are the steps to settle a credit card debt?

Hello there, I'm a living witness of credit card debt and poor credit historyuntil my friend suggested a private professional hacker/credit cardexpert who helped in clearing my credit card debts and loan , nowI'm debt free, and my credit score is great and I bet they'reprofessionals, you can log ( Full Answer )

Where can one find information on how to settle their credit card debt?

Locating information on settling credit card debt is readily available at many credible sources online. The information can be obtained from the Consumer Information site provided by the government. There are also many private companies with information available.