Paying off delinguent accounts how can I rebuild my credit?

Question

I am in the process of making settlements with my credit card companies. They have become delinquent accounts, but now I have come into some money and can pay them off. I have made settlements with some of them to pay off half of the amount owed and they will consider it payed in full. If I do this how does that affect my credit? Would it be better if I paid all of it instead of making a settlement? I was told that if I paid a settlement amount it would be as if I paid it in full. After I do this and all of my debt is paid how can I improve my credit? Or do I just have to wait 6-10 yrs for it to improve? Is there lawyers that can get rid of these accounts on my credit report? Or if I settle everything with these companies will they wipe it off of my credit? I'm quite confused on how all of this works so I am checking before I settle with these companies and pay it off. How do I protect myself?

Answer 1

This is terrible for your credit. If you can't pay off a bill in full, it will haunt you. Contact Consumer Credit Counseling in your area. They can help you pay off those bills the right way and rebuild your credit. They are a non-profit. Don't go with any other organization because most of them AREN'T legitimate. This is the website to one of the many across the United States. http://www.cccsintl.org/

If you choose their repayment plan they will be straight-up with you and how it will affect your credit. They will even tell you honestly if you really need to use a repayment plan. If you go with their method, it may cut interest rates but anything that tinkers with the original repayment scheme is going to have side effects (but cut interest has less negative side effects than paying off only half--that's like credit suicide). They can counsel you instead of doing a debt repayment plan. They will be helpful and tell you what is best for you, not what is best for them. The rule of thumb is that the more you modify your repayment from its original terms, the worse it is for you.

Also try listening to Clark Howard's radio show. He's great with money/consumer issues. http://www.clarkhoward.com

Answer 2

I work in a bank and am quite familiar with your concerns. If credit is the most important factor, paying off the balance on delinquent accounts is going to be the best. A Settlement will show on your credit report as a "Settled account with a $0 balance" it shouldn't say how much you settled for but is definetly is not considered "paid in full" although you are completely done with that debt. Also did your creditors advise you that if your forgiven balance is over $600 you will have to file taxes on that? (Basically will be looked at as additional income.) Also, although Credit Couseling will save you a lot of money in fees and interest, it in fact does hurt your credit too.
My best advise would be to contact all your creditors and let them know you have a limited amount of money to pay off all your credit cards but you need to get some assistance to reduce your balance without doing a settlement, like gettting rid of some late fees, over-limit fees and interest ( and don't be embarrased to tell them about your other ones, because their gonna do whatever they can to ensure you pay them before someone else.) If you can't pay all of them off now, ask your creditors for a in house program where they will eliminate fees and reduce interest.
Another way to look at it is the rating system on your Credit Bureau Reporting. Balance Paid In Full is a R-1 where a Settlement is an R-5 and the worst is where your account gets charged-off which is an R-9.

Answer 3

It looks like Princessd1010 seems to be the only one that has a clue how to handle this. She gave you some great advice.

Having a paid negative on your reports is just as bad as having an unpaid negative.

The credit card accounts can only be reported for 7 years from the time you first became 30 days late and never brought the account current leading to the charge off. It cannot be re-aged and listed for longer than the 7 years.

If you are still dealing with the orginal creditors, send them a pay for delete letter.
Request in that letter to pay a portion of the debt as payment in full.
Request that they will delete anything they have placed on your credit reports after they receive payment.
Request that they will not sell the debt or the remaining portion of the debt if they agree to the settlement.
Request that they will not continue to collect on the debt.

If you are dealing with a collection agency, send a debt validation letter first. Make sure that they have not illegally inflated the amount and also that they actually own the debt. (collection agencys are bad about trying to collect debts that they had once owned but had since sold off)

You might go to the site I've listed. Do some reading in the newbie forum and then in the credit forum. You will be able to learn about debt validation letters, pay for delete letters and one of the important things, the statute of limitations (SOL) for collecting in your state.
If you are out of SOL for collecting, you are not legally bound to pay the debt. You pay if you "want" to not because you have to.

Answer 4

First Congrats on getting your credit cleaned up. It is a tough thing and it is a GREAT thing that you are asking because alot of people do not know how to get this taken care of. When negotiating with your credit card companies try to negotiate that the deliquent account be removed from your credit as part of your payment. No matter what get a paid in full letter from these companies and hold on to them. As you pay these accounts off it can take up to 120 days to notice a difference in your credit score. It will make a drastic improvement if you can negotiate to get them removed from your credit but if you can only negotiate to get it paid in full for less of balance then it might bring your score up slower. Good luck! Please remember that paying off collections is GREAT but what helps out more than anything is keeping all credit cards still open on your credit below 40% of your credit limit. I took my credit score up 70 points in a month by paying all my credit cards to at least 20% of the credit limit.

Also please do not go into Consumer Credit Counsiling. Most lenders consider this as a bankruptcy and 9 times out of 10 it makes your score worse. If you negotiate a payoff with the credit card company it will not be any worse than if you paid off the entire debt.

Answer 5

You can build your credit by having credit. The fastest way I built my credit was with a credit card. Use it pay it, use it pay it, use it pay it and keep doing that and your credit score your beacon score will climb up high. If you keep revolving credit on your card it will drop your score. Everytime I pay off the card each month my score is put in for a raise. Within a year you can have more credit than you can shake a stick. I have a $10,000 limit on my card, but I only charge what I can pay off in two months thats it.
The moral here is they give you the limit, but don;t expect you to use it...thats the key. Money that is available that you don't use up and pay off what ever you use early I eman early no more than two months and your credit rating goes thru the roof.

Answer 6

It would look better on your credit report to make the arrangements you made. Only make payments for about 6 months and then pay them off early. This will help your credit by showing on-time payments and that the account is paid in full.

They are not going to clear your credit report. At this stage they will tell you anything to get you to pay.

Answer 7

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Answer 8

You have to have it in "WRITING" what that they are going to put on your credit report!

Often these places take the money and don't change a thing!
Many times they put some neg entry!

You have to do this your self,and don't screw up,or find a reasonably priced lawyer handle it.

Answer 9

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Answer 10

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