I heard that you can often negotiate to do a cash payoff of your credit card. This amount is usually way lower than what you owe. Is this common or true? If so, does it have a bad effect on your credit score?
2007-03-21 05:25:50 · 5 answers · asked by Big Daddy 3 in Business & Finance ➔ Credit
At http://creditapply.org/blog/ under the post "how can I lower my credit card debt I have found the following
"Use a debt workout/debt reduction firm
These firms will offer their help for a fee. For example if you owed $5,000 on a credit card the firm will work out an agreement with the credit card company to pay $2,000 instead of $5,000 as settlement in full on the debt. Be aware however that this type of workout will affect your credit. Someone who has done a credit card debt settlement would be considered a six on on a scale 1 to 10, 1 being the best score. For someone who started as a 1 or 2 this would be a dramatic devastation of their credit. On the other hand, if an individual already shows multiple accounts on their credit report that have been charged off by creditors they may already have a credit score of approximately 9. For these people the credit will improve from very very bad to only plain
bad. "
Also although it is possible to achieve a credit card debt settlement/reduction on your own, it is not recommended. Creditors do not take the situation nearly as seriously when you call to make a settlement, as when a professional calls.
.A professional is already aware of what most individual creditors may settle for, including what their standard acceptance offer would be. The professional also knows what to say, what not to say, what to ask for, etc. It is not uncommon for collectors to attempt things that could be industry tricks or potentially fraud in order to get you to pay off debt in full.
You can find more about this subject at http://www.financialfreedomsolutions.us/FAQ.htm
2007-03-21 17:59:57 · answer #1 · answered by vongola 1 · 0⤊ 0⤋
It will affect your credit score because you will be reconciling with the collections agency and not the credit card company itself. If you are not in collections yet. Call your credit card company and see if they offer any kind of credit protector service. They usually give you free 30 days and then charge you 1-15% of what is on your bill.. (makes sense?) as a service fee. But they will not report you to the credit bureau for 3 months after they have sent your account to collection. If you loose your job or can not make the payment they will do it for you and you will never incur a late fee. As the credit protector will pay your bill before its late.
2007-03-21 12:38:08 · answer #2 · answered by lilbitt_637 4 · 0⤊ 0⤋
This depends on how and who negotiates this for you. You would want to do what is called settle for deletion. I would suggest you talk with someone who has experience do this for you. It won't be cheap, but it will be done correctly the first time and will save your credit. I have found helpful information at www.genesiscreditgroup.com that you may want to look at.
2007-03-21 12:53:25 · answer #3 · answered by Pay No Taxes For Life 2 · 0⤊ 0⤋
If the credit card is already in collections this may be a good idea. However, if it is still in good standing with your credit card company, this will certainly hurt your credit .
2007-03-21 12:31:53 · answer #4 · answered by Millionaire in training 4 · 0⤊ 0⤋
The amount the credit card company discounts is what they have been charging in penalties and interest.
If they discount what you owe it will hurt your credit,
2007-03-21 12:29:47 · answer #5 · answered by Jeff 3 · 0⤊ 0⤋