Pay off or walk away, what is better?

[Diamond0409]

First let me say I am new to this forum, I have done some research online in an effort to understand how credit reporting works and how your credit scores are determined.

I recived my free copies of my credit reports from the big 3 and all of the negitive information seems to be ligit. their are a few accounts that might not belong to me (I think they are my dads) but they are helping the positive side so I am not concerned.

I have 2 Credit card accounts gone bad, Both have made it to 2nd party credit collectors. One I have a prayer of paying in full, the other there is no way I could do anything but re-establish some repayment aggreement.

It is my understanding the the debts can only be reported for 7 years from the date the debt became delinquient.

It is my understanding that even if I pay the one card in full, it will continue to negetivley effect my score untill the seven years are over.

it is also my understanding the my score is determined by severl factors, My debt to credit ratio, late paments ETC.

so my question is this: what will have the hightest impact on my score in terms of raising the number... Paying off one debt and aranging PMT of the other, or using that same money and paying down debt on accounts in good standing ( which will improve my debt to credit ratio)

I don't wish to throw good money after bad.
My credit is in repairable condition, I was one of the lucky ones. I just need to know the most benificial way to proceed.

Please if you respond, no Initials, I have no idea what the accronyms stand for.
Thanks for your oppinions.

[Diamond0409]

where are the experts to help with problems?
I joined this forum to get help from those more knowledgable than I, but no one has responded to my questions... Where are you experts?????

[Lian]

In regard to FICO scoring, FICO does not score either the payment or non-payment of debt, it scores the delinquencies and derogs that were incurred along the way. Paying or not paying wont impact your credit score.

Addressing your question solely from your current FICO score perspective, it would be better to use the $$ to pay down revolving utilization, as that is a big factor in your scoring. However, current FICO score is not the only issue. Future FICO impacts need to be considered. Unpaid bad debt can hemorrhage, leading to even further damage. Delinquencies can mature into charge-offs, collections, and any unpaid bad debt can result in legal action. Know if the debt is still under your state statute of limitations for payment of debt (SOL) before deciding not to pay.

You might alternately want to use some of the $$ to attempt CR deletion of reported derogs. Pay-for-deletion (PFD) requests can be tried. Unless a derog or delinquency is close to falling off due to its own old age, attempting to get them removed earlier will often give you the biggest FICO bang for the buck. Again, payment alone wont help FICO score. It must be coupled with their agreement to delete negative information from your credit file.

[Diamond0409]

what is the likely hood of going to court and what could the outcome be?

Can you explain how unpaid debt can do any more damage than it already is?

I will look into PFD.

[Lian]

The debt usually continues to accrue interest until paid. In addition to the debt itself, escalations can be made both in credit reporting of their actions, and in bringing legal action, which could ultimately lead to a judgment, requiring your payment, and resulting in an additional derog being reported to your CR.

Only the creditor/debt collector can decide when or if to bring legal action. In general terms, the longer their efforts have been unsuccessful and the higher the debt, the more probable the chances of legal action. Additionally, as you approach expiration of your state statute of limitations, they are forced to make a decision.

[Diamond0409]

If the accounts were charged off for the original creditor and the debt was sold to a collection agency, than a court descision should only require the collection agency to be made whole ( meaning they could only collect that amount they paid for the debt) If they decided to make a poor buisness investment, it isn't my fault... Or am I wrong here?

My two bad accounts are about 1 year old. I only have the ability to fix one with a PFD. The other is just too much money.

Would it be wise to attempt to borrow the money to pay out the big one and offer it as PFD. (( If I could get a loan it would lower my fico score, by both the aplication for credit as well as effecting my Debt to credit ratio)) since the Fico score will not improve by my paying the new loan on time, I have efectivly shot myself in the foot.. ( even if the Collection agency accepts the PFD, the gain in FICO score would be off set by the drop in score as a result of obtaining the new loan)

Has anyone tried negociating with a collection agency and asking them to report the debt as Paid as agreed while dismissing any information that would cast a negitive cloud on the report.. as long as the re-payments are kept up as agreed?

[Diamond0409]

By the way, I was so busy thinking, I forgot to say thank you for helping me..

It seems the older I get the less I can remember.

[Lian]

The debt is what the consumer owed, not what the debt collector paid for it.
Purchase of debt by a debt collector is speculative, usually predicated on buying for less than the full debt, while having the potential to collect the full amount.

Similarly, the fact that an original credit "charged-off" the debt does not prevent them, or others in succession to ownership of the debt, from continuing to attempt collection of the full amount. The reconcilation of any charge-off as it concerns the OC is strictly between them and the IRS. And it is of zero signicance to the debt collector/successor in ownership.

A court will grant judgment based on the debt owed by the consumer, and not upon the internal business decisions of the creditor or the debt collector.

As for borrowing to have $$ to offer a PFD, that is a bit of a gamble, for you have secured the loan with no guarantee of acceptance of the PFD. However, it might be beneficial if they then accept your PFD. If the collection is your only major derog, the gain in FICO score by its deletion will almost certainly be more significant than the hit you will take in the less significant categories of AAoA and a new inquiry.

[Diamond0409]

thank you so much for your input. you explainations have given me a much better understanding of where I stand and what options are available to me.

once again thank you for your time.