Pros and cons of delinquent credit card and settlement options. - The Bills.com Blog
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Pros and cons of delinquent credit card and settlement options.
Question: It you have a delinquent credit card and agree to settle for less than balance due. If the bank reports the settlement as "settled as agreed" do this hurt your score. Or would it be better to pay the balance in full?
Answer: An account showing as "settled as agreed" will likely have a negative impact on your credit score. However, you must keep in mind thata "settled as agreed" account will have less of a negative influence on your credit score than an unpaid account with an outstanding balance.
Therefore, if you do not have enough cash to pay off your delinquent accounts in full, it will still benefit you to settle with your creditors. You must also weigh the negative impact of a "settled" listing on your credit report against the amount of money you could potentially save by settling your debts rather than paying them in full. Considering that many creditors will settle delinquent accounts for as little as 30% to 40% of the balance, if you have $20,000 in outstanding debt, you could save as much as $12,000, or more, by settling your
accounts.
You
must ask yourself if potentially preserving a few points on your credit score is worth that kind of money. Most consumers answer that question in the negative, preferring to settle their accounts when possible. If you can negotiate settlements with your creditors, I think
that you should take advantage of those offers, despite the negative effect the settlements may have on your score. Once you have resolved your accounts through settlement, you can work to improve your credit score through disputes and establishing new positive credit lines.
I encourage you to visit the Bills.com credit solutions page at http://www.bills.com/credit/ to read more about credit
scoring and ways to improve your credit score.
If you are interested in settling your credit card ccounts, you may want to consider the services offered by debt settlement firms. These professional firms can provide the experience and knowledge many consumers lack when trying to negotiate with their creditors on their
own. If you would like a free consultation with one of Bills.com's pre-screened debt resolution firms, I encourage you to submit your contact information here: http://www.bills.com/debthelp/debt/
I hope this information helps you Find. Learn. Save.
Best of luck,
Bill
www.bills.com
Also, make sure to get a free financial health check-up with Bills IQ!
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1. Posted by Kerry on Wednesday 17th October 2007 06:17
my credit score is about 550 i have a mortgage in my name that has been late a few times, I don't have a car but i need one. Do you think i should finance a car where i might get a high interest rate or should i buy a older car cash and subject myself to a faulty car, that might give me headache. I desperately want to increase my credit score. Thank you in advance for answering my question.
2. Posted by Nathan on Wednesday 17th October 2007 16:13
Because you have what is called a subprime credit score the interest rates charged would definitely be higher than normal. You should also look at your credit report to see exactly which accounts are hurting your score. If you can wait, then you should take appropriate steps to improve your credit and then apply for a loan. But, if you are looking to improve your credit, then having a loan and a good payment history on it will definitely help your score but I would not be able to say exactly to what extent. My suggestion is that if the interest rates that you qualify for are prohibitively high then there is no point spending the money on interest payments as I think the interest cost over the life of the loan would not justify the increase in your score. There are other ways to improve your credit, for example you could apply for a secured credit card and make timely payments on it. Please visit http://www.bills.com/credit/ for more information and tips on improving your credit.