Which is better: Pay off whole account or Settle?

Question

I think this is my last question for today LOL

Is it better to pay off a debt the whole amount or to try and settle?

I can see both sides of this: If I pay the whole amount it looks better cause it says paid off and a balance of $0. But if it is already negative on my credit report, then why would it matter?

Also, should I pay the ones that are smaller in amount in full? (I have 11 accounts that are around $200 or under.) I have 2 accounts that are over $500...both of those accounts are listed as two years or older. Should I only try to settle with those two accounts?

Thanks Again! You guys have been great!

Answer 1

It DOES matter if you settle or not. If you settle an account you have TWO Things dinging you-- the payment history AND the "settled for less than full amount" on the account. It DOES make a difference.

You might be able to negotiate settling AND having them mark paid in full. Instead of saying that you want to settle, say, "Hey, I'll pay you $400 today if you reverse those last few $35 late fees but you have to record it as paid in full." Get it in writing and then follow through.

Once their paid go and pull your credit reports and launch disputes-- some wont responnd becuase they dont care-- they have their money-- and then you can get your report partially cleaned up.

Answer 2

Negotiate all you can - it is worth a try and can help you pay off more bills.

Be aware that if you are dealing directly with the company you owe (such as a hospital with a medical bill) and you settle, they can consider the discounted amount as income and you may have to pay taxes on that amount. I have not had it happen, but know that they have the right to do so and know someone who did owe and have to report it on their taxes (but they say the taxes were only a small portion of what they saved and it was well worth it).

I strongly recommend you check out Dave Ramsey's Financial Peace University. There are classes all across the country - I took the 13 week series in a church, although lots of places sponsor the series - and the web site can direct you to a location in your area. The FPU classes and the Dave Ramsey debt reduction system changed my life - when I started it, I couldn't afford the $100 tuition and had to accept a scholarship. And a year later I am in the best financial condition in my life. Please check into it - you will be glad you did and it will help you with many of the questions you have.

Answer 3

If you are in default enough for them to settle the debt then you are better off settling for a much lower amount The damage to your credit has been done. They would only accept a settlement if they are about to write off the debt and send it to the credit collections black hole. Where they are likely to recover 10-50 percent of the balance after expenses. Your Fico score will be better when the balance is paid off whether by settlement or paid in full. This will not be the most popular answer but you have to understand the system. Make sure you get everything in writing before sending in a penny. Negotiate the removal of the negative remark on your credit report in return for the settlement. Or make sure you negotiate the placement of paid full in the credit report for the settlement. If they say that is not possible, they are lying. This is a business transaction, everything is possible.

Answer 4

Pay them off if you can. Your credit report will show a difference between settled accounts and paid off accounts. Plus, any debt forgiven in a settlement is considered income for you, so you may end up paying more taxes on it.

Answer 5

Ok a settle account is not as good as a paid account. You should try to get the account removed from the credit report, work it into the deal.
If an account is not been repored in the last 2 years paying them can harm your credit. I would not pay them if they will not remove it from your credit.

Answer 6

You have a total of 13 accounts, get in to an agreement to make regular payments to each one. This brings all accounts current, and listed as "paying according to agreement". If there is any that you can pay off, pay it off in full and next month add the regular payment to the payment of the highest Interest account.

Answer 7

The only benefit to settling is that you may end up paying a lower amount. But you'd have to pay it all up front.

You seem to think that "settling" will remove it from your report. This is not the case.

It doesn't make any difference which one you pay off first.

Answer 8

Consolidate babe! I would pay everything all at once.. ur debt is quite small even though u have soo many accounts. You'll rest easier at nite. Cheers!

Answer 9

There's no two sides to this.......you borrowed the money so pay it back in full as agreed.

Answer 10

pay them off