Debt Settlement?

Question

I spoke to a collection agent today about an old debt that I am trying to pay off. They offered a settlement for about 20% less than the total. They informed me that if I took the settlement it would look bad on my credit report. Any truth to this or is this slimeball agent just trying to get as much money out of me as possible?
I was under the impression that even if I pay the settlement offer from the collection agency that it will still show as being paid on my credit report and the account being closed.

How can it ding your credit. If it is an old account that is in collection. Won't my score go up when it's paid? Do you mean it won't go up as much?

Answer 1

Whether you pay in full or make a partial payment as payment in full, when the collection agency reports your payment on the account to the CRA's, the account will be updated (updating is not re-aging) When it's updated, it will make it look newer than it actually is. A paid negative is still a negative.

Never speak to the collection agency on the phone. Do everything in writing and send it certified mail return receipt.

You say it's an old debt, have you checked the collecting SOL in your state to see if you are past it or still in it? If not, you should.

Have you sent the collection agency a debt validation letter to make sure the amount they are requesting is the true amount, that they are licensed and/or bonded to collect in your state if your state requires it, that they even have the legal right to collect that debt? If not, you should.

Have you checked your credit reports to see if they are reporting any violations and dispute the violations? If not, you should.

If you are out of the collecting SOL, you have a legal right to inform them that the debt is past the collecting SOL and no longer legally collectible.

If you are out of the collecting SOL or if you are still within the collecting SOL and want to pay - after they have properly validated, send a pay for delete letter that would demand they remove anything they have placed on your reports. You should also demand to pay a portion of the debt as payment in full.

How much you should offer depends on how old the debt is or if it is out of the collecting SOL. If you are out of the collecting SOL and want to pay, they would probably take whatever you offer since your offer to pay would be the only legal way they can make anything off of it.

Just be sure to have their agreement in writing. If you don't you may find the same collection agency, or another, trying to collect on the remaining portion of the debt.

Also one thing you should be aware of, in some states making a payment on a debt will re-set the collecting SOL. IF you live in one of those states and have nothing in writing from them that the debt is fully satisfied upon your partial payment, you may find a suit filed against you for the remaining amount.

Never - ever trust a collection agency !!!!
Make sure "everything" is in writing.
Never sign your name on any of your letters to a collection agency. Signatures have a way of jumping to other paperwork. Just type your name or print your initials.
Never pay by personal check, only use a cashiers check or money order.

You might click on my profile and click on the link to find your states collecting SOL. You might also do some reading on the other links in my profile - the FDCPA, FCRA, etc.

Answer 2

It will show up on your report as paid and closed, but it will also say that it was a settlement which some creditors may not look favorably on!

Answer 3

It will show up as closed:settled, which will ding your credit because you didn't pay the account in full.