Settlements

[crystalhattery]

Hello all I am new to this forum but I have read through some of the posts and I am happy to have finally found a place that could be a great deal of help to me and my family when it comes to credit..so in advance I want to say thank you for all of the advice that I may receive.. also if I have repeated a question please forgive me..
My question is my family is trying to buy a house someday..and I figured our shot maybe helped by paying the settlement offers that we have received..so I was reading on the internet what alot of other sites have said..and it's kind of frustrating..yes I know we should have been more careful of our credit back then..but had alot of issues to deal with as well..anyway I have read that basically if you do get a settlement and you pay it. It will noted as settled in full which according to everything I have read..is NOT great..your credit will also take a bad hit as well..this is were we are getting frustrated..but our credit is not great either..we have a credit card that we are current on..and thats our only open account..so if anyone could help with any advice that will be fantastic.
I guess basically are we hurting or helping our selves..and what can we possibly do to help us recover??
thanks so much..

[Lian]

The key term is settlement of the debt, not how much was accepted to secure the settlement.

When you make payment of a debt, the party accepting that payment can regard it in one of two ways. It either settles the debt, or is just partial payment, such as only for the original amount at time of default. It is their determination, upon payment, as to whether it legally "settles" the debt, and nothing more is owed.

If they accept payment, they record this decision in their next reporting to the CRA. The CRA provides only ONE basic code for recording the status of debt. That is the "Current Account Status." Current status has only one category for paid debt, and that is PAID. Current status does not record any information on the $$ terms of your settlement. If settlement, either for the full amount or for less, was accepted as a settlement of the debt, they simply report "paid" as the current status.

The party can, IF they so choose, also make a separate reporting of settlements that were for less than the full amount of the debt. They do that by way of separate reporting under the code "Special comments" (field code 19). There, they can enter the comment "paid for less than the full amount." The specific $$ terms of the settlement are not recorded, just their comment that you did not pay the full amount.

That special comment, if entered into your credit file, can be viewed by those pulling your CR. They may have impact on their credit decisions, so it is definitely not something you want in your CR. But the debt is still settled and paid, as reflected in its current status.

FICO does not score how debt was paid, so that comment has no impact on your actual credit scoring. It is just a big negative in a manual review of your CR.

[crystalhattery]

thank you for taking the time to post a reply it did help me understand things a little more..

[Hal Jordan]

Just like Lian said... Paying them off to show paid in full or settled will have absolutely no effect on your credit score. Unpaid, paid.. Fico factors it all the same.

I always tell people that they shouldn't pay off a collection or pay an original creditor one dime until they agree in writing to remove the negative entry from your credit reports once they receive payment.

No letter.. no check!

(Of course, every situation is different and if paying can avoid a for sure impending law suit.. I would probably pay there also unless I knew I was likely to win the case in court.

[crystalhattery]

ah ok..good point..well we did pay off one and they had the CA title removed..now even with that would I have to contact the OC and have them remove their name as well?? However I do have a copy of the letter saying it was a done deal..

ok well let me ask another question..it may be in another thread I will look..is there any other ways to improve our score,FICO in order to get our house in the near future..??? thanks a ton..I am so beyond thrilled to have come across this forum..

[Hal Jordan]

debt to credit utilization is an immediate way to boost credit score. You can search my posts as I and Lian have talked a great deal about the subject over the last few weeks.

WRT to your first question... You have a letter from the Collection Agency agreeing to delete and they deleted but the OC line still remains? I assume it shows "paid" in the status field?

You'll probably have to do a goodwill letter to the OC to have it removed but I wouldn't hold my breath. They have no incentive now to work with you now that they have received payment. More than likely you won't be able to get the OC to do anything.

You need to read up on the 623 dispute method and see if that is applicable toward your situation and if so file a direct dispute with the OC.

[Lian]

Is there anything remaining in your relationship with the OC that would make them want you back as a customer? They are capitalists, not humanitarians. Ina good-will request to them, is there anything you can offer, even if just a promise, that could put business their way that they would find beneficial?