Will making a deal with a credit card to pay it off still hurt my credit score?

Question

I am confused. We are in a financial mess and need to make amends now. If we only pay a portion of our debt by making arrangements to pay an agreed upon amount instead of the original bill, will that hurt our chances of increasing our credit score? I was told we really need to pay what is owed and not the reduced amount the card issuer would settle for.

Answer 1

Yes it will. These financial companies don't request to the credit reporters to remove your name from debt for a long time, if they even do. What they are doing is trying to get money from you, ANY money. They re not going to help you fix anything, I know, Ive been through it. You have to go down literally to a credit bureau with all of your receipts, letters and info, and they still sit on their asses. If I were you, I'd pay them in small amounts, and keep track of it. They have to accept it because you are paying! They cannot sue you, only harrass and threaten you. Or you can do like I did, and wait out a full 7 years, and any debt is wiped off your record, its the law. Good luck.

Answer 2

Yes, and yes, by all means do pay the amount agreed, do not ask them to settle as this will really hurt your fico score, just pay the minimum amount due for right now until you get your head above water and do it with all companies, & creditors, though you may not apply for credit now, this will always remain on your credit report as negative if it does become a charge off or settled debt, do your very best to pay on time, it will really pay off in the future, the fico will not settle or work itself out, your responsible habits will!! You'll be glad you did, I once tried setlling a credit card debt for a client, as he was refinancing his home and had very high debt and tax liens, the creditor made it very clear that unless client was okay with getting a negative credit rating reported to pay off the debt as agreed, and we had to do so and pay off all the debt accordingly. So pay as agreed. We all sign when making a credit card purchase you will pay as agreed.
Have you tried other avenues, such as if you have a home, refinancing for debt consolidation at a lowest interest rate?
Another thing is, never go to any of those credit counseling services, I'm sure you know they'll ruin your credit. Be careful, good luck!!

Answer 3

Question? Would you rather be hit in the head with a baseball bat, or kicked in the groin?

Answer...neither.

Same applies to your credit report. When you don't pay a debt, the creditor places a negative item to your credit history. That is bad for your credit score.

When you pay off a debt, whether it's only a portion of the debt or the whole thing, all the creditor does is change the negative listing to reflect that.

IT'S STILL A NEGATIVE ITEM! And it will still hurt your score. I do not understand why these people who seem to understand how FICO works continue to tell you the opposite!

If you want your credit to improve, you need to get these negative items removed. And the only way that will happen is if the creditor does it.

You have seen talk here about a "pay and remove" letter. That means you need to get an agreement with the creditor that, once you have paid off the debt (in whole or part) that they MUST remove the negative item from your credit history.

Remember, the whole purpose of paying off this debt is to repair your credit. Why on earth would you pay this debt and still have bad credit?

So contact the creditor and get him to agree IN WRITING to remove the bad credit information before you pay him anything.

Answer 4

That is true. The credit score basically measures ur reliability in incuring and paying back debt so paying off the whole amount is better for ur FICO score. However in ur situation ur score has already been damaged greately so depending on how much the total is u may prefer to take another blow to the score rather than paying the whole thing especially because events (not paying the whole amount AND the events that led to this situation) will remain on ur credit history for roughly the same amount of time.

Answer 5

Paying a settlement doesn't hurt or help your credit. It still reflects negatively on your report for being late but doesn't show up as a collection or judgement, which is a good thing. If you can afford to take the settlement, do it. It costs you much less by saving you the fees and it costs your creditor less by not having to send it to a collections company who would only offer them a portion of the original amount you owe them. It's in the best interest of everyone to cut your losses and go your separate ways.

Answer 6

If you pay an amount less that what is owed, a note will be made of that on your report, however, if this is financially better for you then it may be your only choice, if you are able to pay off the total amount it is better for you credit score. How many accounts do you have and how many of them are negative? If you don't have many then this particular account will have a more signifcant effect on your fico score than if you had alot of accounts. Go to http://creditwisdom.blogspot.com for advice and information on credit and managing debt.

Answer 7

Dear confused: your contract is between you and your credit card company. When you and they make an agreement to pay your card off, they are under NO obligation to treat you kindly on your credit report. However, if they do not or are not willing to treat you better on your credit report than you would have been treated had you not made a deal to pay it off, what would your incentive be to pay it off? I have always advised my clients to treat the credit card companies as business people and if they receive something from you, they should improve your credit report. If they do not, then why do something for them? If they are going to degrade your credit anyway, there is NO incentive for you to pay the card off. Ask them what they are willing to do for you if you pay your card off early. If they are willing to do something that you wouldn't have been entitled to, you should consider it. Otherwise, if they say, "it doesn't matter, we will still report you as having paid late for 60/90 days," then my advice is to make only the minimum payments and do nothing for them that you wouldn't have to. Good luck!

Answer 8

YES, it will hurt your score if you don't pay the amount in full...BUT so will paying it off over time...Just pay the reduced amount amount and get yourself sorted out and start paying bills on time..the score will sort itself out after a while. Since you are in a mess the score will mean nothing since nobody is going to loan you money at this time..

Answer 9

you favor to leave your credit money owed open with low to no stability. do no longer close the account leave them open. an excellent portion of your score relies upon on the length of time that you've had open credit lines in strong status. So and open account with out stability is an exceedingly strong aspect. once you pay your money owed to a 0 stability that's going to take sometime 30-60 days for that info replace on your credit report. once the account stability info is as a lot as date your credit will initiate to advance. The longer the account is open in strong status with a low or no stability the better your score will climb. fastened price loans which comprise motor vehicle loans and private loan loans in strong status for twenty-four+ months will convey your score into the mid seven hundred's. credit swings from mid seven hundred's to mid six hundred's are regularly with the aid of extreme mastercard balances. be careful doing 0% rollovers this may properly be an excellent seize. Doing this may decrease your credit for a number of motives. a million)Your stability to credit decrease ratio will be extreme, this lowers your score. 2)once you open the recent 0% account the credit reporting agencies weight your score on the form of recent money owed you've and the length of time because you've opened you new money owed. 3)once you word for the recent account that's an inquiry, assorted inquiries decrease your score. this may damage your score yet when there open already its nice do not close them. that's a income on your mastercard agencies because in case your score is decreased then your locked in with them. If some thing takes position, you previous due on a fee regardless of if its “lost contained in the mail” your charges bounce as a lot as twenty% and also you lock in with a extreme price on an excellent stability. This =$$$$ on your lenders.

Answer 10

Ask the card issuer. They probably would prefer a portion of the balance to nothing at all. That is why they will settle.