Is it wise to agree to a settlement on an unpaid credit card balance with a collection agency?

Question

In recent weeks, I've been offered to make a settlement on some of my unpaid credit card balances with a few of the collection agencies that have been calling my house frequently. Personally, I don't think that's a wise decision because it may affect my credit background with all three major credit bureaus. As we all know, collection agencies are known to hound consumers to death when it involves collecting money on bad debts and charged-off accounts from former creditors. I understand credit advisors across the country don't recommend a consumer to "settle" an account with neither a creditor nor a collection agency. I'd rather just face the music and pay the balance on record or if push comes to shove, maybe consider debt consolidation. Please advise what would be the best option to move forward with.

Answer 1

Well, if the collection agency is legitimate, and they really have assumed the collection of the debt, then it might be a good thing to do.

Assume you owe $10,000. If the credit card company "gives up" collecting it from you, they'll often sell the debt to a collection agency for much less - say $3000. So if the collection agency can get you to pay $5000, everybody wins.

Beware the strong-arm tactics employed by the collection agencies, though. They should treat you fairly and courteously, and should offer you a payment schedule.

Answer 2

I agree with geek

I just wanted to add a few things.

Whether you pay in full or pay a settled amount, if you do not request deletion upon payment - those notations on your credit report will drop your scores since the account will be updated to reflect the payment and make it "look" like a newer account than it actually is.

Paying in full or paying a settled amount does not guarantee that they will not sell the account after payment (they have been known to sell fully paid accounts to other collectors)

Never make a verbal agreement with a collector.
Do everything in writing.
Never sign your signature on your letters, only print your initials or type your name
Always send everything certified mail return receipt.

You should always request validation before you start talking payment - among other things you need to make sure they have a legal right to collect the debt (yes collectors have been known to try to collect debts that they do not own or have assignment)

After they properly validate, you should send them a letter requesting that the lesser amount paid will be considered "payment in full".
If they sign an agreement to that it would be illegal for them to continue to try to collect or sell the remaining amount.
You should also request that they delete the account they are reporting on your credit reports upon payment.

You should have a signed agreement for both of those points before paying.

Answer 3

Take the settlement and then use a cheap credit repair company to remove the 0 balance negative items. This is the most cost effective solution. I know of a company in Texas that does a 90 day credit repair program for just $125.

Answer 4

i do know from experiance that when you do that it will show on the credit report as "charged off". Yes it's paid but anyone looking can see that you settled and didnt pay the whole sum. Good luck

Answer 5

Try incharge.com. That's who I go through and I have had no problems. My score dropped recently, but will be working its way back up the longer I am on the program. They are legitmate and really easy to work with.