Advice on Charge Offs and Settlement

Can I Settle a Debt Before a Creditor Charges It Off?

Are charge-offs when a creditor wants to settle the debt by offering me to pay half the debt? Is this a good thing or will it look bad on my credit report? Can I settle a debt before a creditor charges it off?

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Bill's Answer
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Highlights


  • Charge off is an accounting action that does not change the legal status of a debt.
  • Charge off does not mean the debt is forgiven or canceled.
  • Charge off will harm a credit score.

You can negotiate a settlement to a credit card debt before the credit card issuer moves the debt to a charge-off status.

According to a large debt settlement provider Bills.com contacts, about one in five settlements the company negotiates occur before the account is charged off.

Some big names in consumer lending are willing to negotiate pre-charge-off account settlements too, including:

  • Wells Fargo
  • Capital One
  • Discover
  • PNC Bank
  • Comenity Bank
  • BB&T
  • USAA

Let’s look at charge-off and what it means, how a charge-off harms your credit score, and the informal rules for negotiating a pre-charge-off settlement.

What is a Charge-Off?

Charge-off is an accounting term used by creditors that means a creditor transferred an account from its “accounts receivable” ledger to its general ledger’s “bad debt” line. Credit issuers are required to do this by federal rules and guidelines in an attempt to prevent banks and other lenders from inflating future earnings numbers by including defaulted accounts.

The main consequence of an account charging off is the account will appear as a negative item (R9) on your credit reports.

Charge off does not change the legal status of the debt. After an original creditor places a debt in charge-off status:

  • You still owe the debt
  • Your debt is not cancelled
  • Your debt is not forgiven
  • You are still liable for the debt
  • Your creditor may continue to collect on the debt
  • Your creditor may sell the debt to a collection agent
  • The original creditor may continue to charge interest on the account

If you need help with settling old accounts, get a no-cost .

Credit Score & Delinquent Debt

If you pay-off or settle a charged-off account your FICO credit score won't improve. The notation that the account was charged off will remain. However, VantageScore treats resolved debts differently. VantageScore ignores resolved accounts, so you VantageScore credit score will improve once the debt is at $0 balance.

Negotiating a Debt Settlement

Most creditors will agree to reduced balance settlements on delinquent accounts, at some point in the collection process. For example, if you contact a creditor and explain you would like to settle this account, the creditor may accept a reduced-rate settlement to resolve your outstanding debt and put an end to their collections.

Creditors often require a settlement offer to be paid in a single, lump-sum payment, though some may allow you to pay a settlement over a few months. Don't hesitate to ask for a settlement in payments when negotiating with your creditor.

ldquo;Some lenders start the litigation process sooner, when the balance is higher,” said a debt negotiator at a large debt settlement provider Bills.com contacted. “One example is . It sends Summons and Complaints to the delinquent accounts prior to charge off and collection placement.” A high balance is $20,000 or more, though this varies by creditor.

Always get a  from the creditor before sending a payment. The offer should state that the account will be brought to a $0 balance and the matter closed, if you make the agreed payment.

You need to protection of a written offer so the creditor can't claim that what you sent was only a payment and that you still owe the remaining balance. If the creditor won't send a written settlement offer, don't send any money. 

If you choose to settle an account, your credit reports may list an account status of:

  • “settled in full,”
  • “settled as agreed,”
  • “settled for less than full balance”

These account statuses are not considered as positive as a “paid in full” status, but the difference is generally negligible, especially considering the amount of money you may be able to save by settling the debt.

Pre-Charge-Off Settlement

Settling an account before it charges off is a good solution for both you and the creditor. It’s good for the creditor because it gets the account resolved with a lower loss than setting the account to a collection agent. It’s good for the consumer because he or she avoids collection calls, a possible lawsuit, judgment, and everything that can follow a judgment such as wage garnishment.

Struggling with debt? Contact one of Bills.com’s pre-screened debt providers for a .

When will a creditor consider a debt settlement before charge-off? According to a large debt settlement company source, creditors are most open to a pre-charge-off settlement when the consumer can demonstrate a . Most creditors accept the following events as hardships:

  • Loss of employment
  • Marital separation
  • Medical expenses

You do not necessarily need to show a hardship to negotiate a settlement, but it increases the chances the creditor will settle. If you have a legitimate hardship, share that reason with your creditor and be prepared to send proof of your hardship.

Typical pre-charge-off settlements amount to about 50 cents on the dollar, which is right in the center of the typical debt settlement range from 40 to 60 cents on the dollar.

You can , or hire a to do the heavy lifting for you.

I hope this information helps you Find. Learn & Save.

Best,

Bill

63 Comments

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  • 35x35
    Apr, 2012
    Sue
    I had a Cap 1 account that was current when I received correspondence from them, telling me I did not have to pay the debt if I didn't want to and it would be written off. The next month I didn't pay and they wrote it off. I checked my credit report 2 years later, and they reported it as a "settled for less than the full balance", a key derogatory. Recently, I paid the balance due, not because I legally had to, but because I wanted my creditors to see I paid my bills in full. If I had known it would be a key derogatory, I wouldn't have accepted the settlement. They haven't reported my new status (account paid in full) yet, and when I called the dispute department, the lady was confused and said she had to research this, as I have no late payments before this settlement. Usually, they don't report "paid chargeoff" unless it's been late at least 120 days. Does anyone have any advice as how this should be reported? I'm trying to get it reported as "Paid in full" or deleted entirely. Any advice is appreciated.
    0 Votes

    • 35x35
      Apr, 2012
      Bill
      Your best bet is to continue to work with Capital One to set an accurate status for this account. Readers? We welcome your constructive ideas.
      0 Votes

  • 35x35
    Mar, 2012
    Bailey
    Debt was originally Citibank credit card. I have been unemployed for 3 years and made minimum payments until May 2011 at which point Citi doubled the minimum and would not negotiate. In Oct/11 I recd notification from Citi that it would go to collection by Nov 9 but when I called to make arrangements for payment on Nov 7 they had already sent it to collections. And thus the games ensued...CA has sent a summons, there is a charge off on my CR in the name of Citi. Summons says that CA is acting for Citi but I'm inclined to believe that this debt has been sold. I requested debt validation and as of yesterday received photocopies of my Citi bills. Does this confirm that Citi still owns the debt or should dig deeper?? Thanks
    0 Votes

    • 35x35
      Apr, 2012
      Bill
      If you have received a summons, and the collection agency has sent proof of the debt, then you should be prepared to either immediately negotiate a settlement or go to court.
      0 Votes

    • 35x35
      Apr, 2012
      Bailey
      Perhaps I should elaborate. CA/law firm is Cohen and Slamowitz and they seem to have quite a reputation for their unethical tactics. (and pending class actions against them) The process server perjured himself on the Affidavit of Service, left the summons in the snow on my driveway, dollar amount on summons does not match statements and recently another CA has started calling. I would hate to make arrangements to settle with the wrong CA. Thanks for your help.
      0 Votes

    • 35x35
      Apr, 2012
      Bill
      The legal process works fairly when everyone plays by the rules. When a consumer faces a collection agent that may or may not be playing fairly, it is time to level the playing field. Consult with a lawyer who has consumer law experience. This has four advantages:
      1. You will know your rights and liabilities under state and federal law
      2. Your advocate will fights for your rights against an opponent that may not be following the rules.
      3. Your opponent will know it cannot bully you.
      4. If your opponent does not follow the rules, your lawyer knows what steps you can take to get the appropriate sanctions.

      My advice? Consult with a lawyer immediately.

      0 Votes

    • 35x35
      Apr, 2012
      Sam
      Bailey, check the rules, if it is not proper service then go for motion to dismiss with reason of not proper service and then try to settle with them
      0 Votes

  • 35x35
    Jan, 2012
    Dennis
    I am in the final funding stage of a refinance. The day of signing, Capital One places a carge-off onto my credit reports for about $10,000. Until then, there were no Capital One reports to any of the credit bureaus. There had been attempts by colleciton agencies over the past 2 years, but they were never able to respond to my request for validation of the claim. I called Cap One, and they said they report every 30 days, which cannot be true in this case. One of the credit reporting agencies is showing satisfactory until today, indicating a sudden charge off out of the blue. While I had an account with them years ago, they have not reported as is showing on the current report, not provided a demand, and if they hired collection agencies, they were not able to validate the debt. I have copies of my credit reports for the past several years. How can they just suddely show up and give the impression they had been reporting OK for years when they had not reported at all, then charge off for years when they had not?
    0 Votes

    • 35x35
      Jan, 2012
      Bill
      What is the date of first delinquency on the Capitol One account in question? If it is more than 7½ years ago, then it may not report this derogatory on your credit report.

      You imply that Capitol One, the original creditor, placed the derogatory on your report. If it is a collection agent, then validate the debt. If Capitol One is the original creditor and is reporting the debt, then your only option is to negotiate a lump sum settlement.
      0 Votes

    • 35x35
      Jan, 2012
      Dennis
      Thanks for your reply. Cap One is the original creditor, researching date of first delinquency. Probably between 4 and 7 years ago, so, outside the CA SOL, but under the 7.5 year credit reporting date. There were NO Cap One accounts on my credit reports until literally yesterday when this suddenly showed up. They put into the report that the account was OK for each month for the past 2 years, when in fact, they had not done ANY reporting at all. Can they do this? Interestingly, there has been no demand letter at all from Cap One, just a series of collection agents who cannot validate the debt.
      0 Votes

    • 35x35
      Jan, 2012
      Bill
      If I understand correctly, you had an account with Cap One, that was not paid off, but whose delinquency occurred more than 4 years ago. You made a smart move with collection agencies by demanding they validate the debt. It appears Capitol One either purchased your collection account, which it sold to collection agents, or it hired contractors to collect the debt, but gave up on that tactic. It is unusual for a creditor to report an account today it failed to report as delinquent yesterday, but there is nothing illegal I can see what you described. A creditor must make accurate reports to the credit reporting agencies. If the report of the derogatory account is accurate, then you do not have recourse other than negotiating a settlement.
      0 Votes

  • 35x35
    Oct, 2011
    Rachael
    My credit report has a listing from Capital One for a debt that was "Legally paid in full for less than the full balance" and lists $530. I am applying for a mortgage in the near future and my score is on the cusp of risk and medium. Would it be possible to call/write to them saying "I'll pay the remainder for a deletion?" Is there any other way to get this taken off?
    0 Votes

    • 35x35
      Oct, 2011
      Bill
      If you pay in full, then the creditor would change the status. However, it sounds like the file has already been closed. Concentrate now on improving your score. If you are making your payments on time, then the old collection account will probably not severely damage your score.
      0 Votes

    • 35x35
      Feb, 2012
      Sara
      So, are you saying that it is possible to ask for a PFD after already paying according to the settlement for less than the full balance? I settled for less on an old HSBC acct that was charged-off, before I even knew what a PFD was. I have been send HSBC GW letters, but they won't update the account status as paid. (It's currently being reported as charged-off with a 0 balance and settled for less than full balance.) I am tempted to call them and ask if they would consider taking the remainder of the balance in exchange for a deletion. Is this done frequently? Or am I crazy? My fear is that they're going to think I am trying to bribe them or something...
      0 Votes

    • 35x35
      Feb, 2012
      Bill
      The creditor is legally obligated to accurately report your activities. Negative activity falls off your report 7 years after the first date of delinquency.
      0 Votes

  • 35x35
    Oct, 2011
    marc
    I know people who negotiated 50% off "charge off" payment but in the end the company still made quite a profit considering the outrageous fees which were added on to the bill.
    0 Votes

  • 35x35
    Sep, 2011
    Jackie
    I am 22yrs old. I made many irresponsible decisions when I was younger I currently have 3 negative accounts on my CR, 2 cards one of which has been closed and a less than desirable Credit Score. My goal by the end of the year is to be debt free except for my student loans. I have a credit card that was charged off with a balance of approx $4,500. I called the collections company and have been making monthly payments but I am going to try to make settlement and "pay-to-delete" agreement with them within the next month. With my other CC I have been on time on my payments and am close to paying off the balance. Now with the other two negative accounts that are on my CR (which were less than $100 each) I called each collections company and paid the amounts in full. I paid for each amount without realizing that the negative information would stay on my CR. My credit score currently is inhibiting my from moving forward in my life so my question to you is. What is your advice on my current situation? Should I attempt to make a settlement with the Charged off CC company or should I pay the balance in full? Is there any way to request for negative information to be taken off my account after it has been paid in full? I have learned to manage my money well at this point while trying to clean up my past mistakes. My biggest goal is to get a new car and be able to buy a house after I graduate which is approaching quickly. I just don't want my previous mistakes to haunt me when I try to make a future for myself. Thank you for your input.
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      See the Bills.com resource Pay For Delete to learn more about dealing with your credit report.

      There is no financial or credit score benefit for you to pay the entire amount due on a delinquent debt. See the Bills.com resource Negotiating Debt to learn how to resolve your debt for less than the balance due.
      1 Votes

    • 35x35
      Sep, 2011
      Jackie
      Thank you for your response. What about the negative information that is shown as "Paid" on my CR. Is there anyway to request to have that taken off?
      0 Votes

    • 35x35
      Sep, 2011
      Bill
      I have read that some consumers in your situation will ask a creditor to remove a derogatory but resolved entry on a credit report for "goodwill" purposes. You have no reason not to ask for such a gesture.
      0 Votes

  • 35x35
    Sep, 2011
    Adrienne
    This year, I stopped paying all my credit cards and my second mortgage after losing essentially all my money in real estate. Due to my truly pathetic financial situation, and the fact that I started the process toward Chapter 7 bankruptcy, a couple of the credit collections agencies called and offered me very low settlement offers. I started doing this and with family help and have now settled 5 of 7 credit cards and my second mortgage for 10-20% of full balance. My question is the last two credit cards are not being as cooperative. Capitol One wants 80% to settle with some words indicating that 60% MIGHT do it. That is just too much for me. I can't get that much. Wells Fargo just has not charged off my account yet, so I can't deal with them yet, but they seem a little sticky, too. So how does Capital One usually work. Can you get them to 15%??? All the other major credit cards did. What do I have to do to convince Capital One? Thanks.
    0 Votes

    • 35x35
      Sep, 2011
      Bill
      A settlement is a negotiation between two parties. There is nothing that you can do to compel Capitol One to settle for a low percentage. What you can try to do is to impress upon them the degree of your financial hardship, giving as much detail as you can to prove your inability to pay.
      0 Votes

  • 35x35
    May, 2011
    Ann
    I have several accounts that were settled through an attorney over a year ago. One of the accounts is listed as "Paid in Full" but every month I am getting another non-payment Collection ding on the account. The other is stating it is a charge off even though it was settled over a year ago. Any ideas on how I can get these resolved?
    0 Votes

    • 35x35
      May, 2011
      Bill
      Send a copy of your settlement agreement or proof of payment to the offending collection agents, along with a cease communication letter.
      0 Votes

  • 35x35
    May, 2011
    karyn
    I sold my house thru a short sale in October of 2010. We started in higher when we originally put the house on the market, and they we needed to lower the price to be more competitive with the market. I still made my monthly payments on time. I recently checked my credit report, and noticed that the mortgage company reported to the credit bureau "settled for less than full balance." I am currently paying a promissory note in the amount of $18,500, which is not noted on this report. So if I pay off the note, would the report still show "settled for less than full balance?" Shouldn't the mortgage company have reported "paid in full and show a zero balance?" This does not make sense!! I spoke to a loan officer at a local bank who is willing to give me a loan, and he advised that the mortgage company is reporting false information to the credit bureau. When we had a conference call with the mortgage company, the supervisor was clueless and didn’t want to help. She advised that I can dispute this with their legal team. There is no point of contact, and no telephone number to their legal department. Just a fax number to submit your issue. Do you know how I can dispute my case?
    0 Votes

    • 35x35
      May, 2011
      Bill
      See the Bills.com resource Credit Report Dispute to learn the steps to dispute an error on a credit report.
      0 Votes

  • 35x35
    Apr, 2011
    Daniel
    I had an American Express Credit card charged off by AMEX. They sold it to a collection agency and I think it has changed hands once or twice between other collection agencies. It finally reached the one I am dealing with now. They served me and filed a lawsuit for the money I owe. I called them and worked out a settlement. $4500 for a $5700 debt. I still have one payment left to make. Should I pay off the balance in full or is it better to just make the last payment and fulfill the settlement?
    0 Votes

    • 35x35
      Apr, 2011
      Bill
      From a credit report perspective, the damage is done and there is no benefit for you to pay the entire balance. From a legal perspective, you and the collection agent reached a settlement agreement, so there is no benefit to you to pay more than agreed. If American Express sold your collection account to this or another collection agent, then it is never going to see your settlement money, so there is no benefit to American Express for paying more than you agreed. The only party that will benefit if you pay more than the settlement agreement is the collection agent. If the extra $1,200 is burning a hole in your pocket, then invest it in a mutual fund or IRA.
      0 Votes

    • 35x35
      Apr, 2011
      Daniel
      Thank you so much for the help!
      0 Votes

  • 35x35
    Feb, 2011
    Chris
    Hi Bill, I have a credit card that was charged off two years ago after I stopped making payments for several months. I entered into a monthly payment plan with a debt collector that contacted me about the account soon after the charge off. I am now ready to settle the account and sent the debt collector a pay for delete letter, certified mail with return receipt, offering to settle for 45% of the $4000 that I still owe. Instead of replying in writing, they contacted me by phone asking if I was willing to pay the amount immediately. I asked about getting the account removed from my credit report and the collection agency replied that they do not report to the credit bureaus and that I would have to contact the original creditor, the credit card company, for that. I contacted the credit card company once after the charge off when I was trying to enter into a debt management program and needed to verify who owned my debts. The credit card company said that they no longer owned my account, so am I unable to get the account deleted then if the collection agency does not report to credit bureaus? Another confusing thing is that the collection agency said it would need to get my settlement amount approved by my original creditor before they could agree to it. They asked me some information about my assets (I have none, not even a car) and where I received the funds to settle (part of it comes from my income tax return and the rest I have been saving to make the settlement) and said that they would send an e-mail to my original creditor. If my original creditor, the credit card company, says they no longer own the debt, why would they need to approve a settlement with the collection agency? The collection agency has always said that they work on behalf of my original creditor, which is Capital One. Am I missing something here or am I not receiving correct information from one or both parties? Should I bother settling with the collection agency or try sending a Pay for Delete letter to Capital One instead? The account is currently listed as a charge off on my credit report with a 0 balance, but it is being reported as 120 delinquent every month even though I have been making monthly payments to the collection agency every month for two years. I now understand why that is, but do not understand who owns my account and who I should be dealing with to settle it and get it deleted. Thanks for your help.
    0 Votes

    • 35x35
      Feb, 2011
      Bill
      A collection agent can either own a collection account or work as a contractor on behalf of the original creditor. Obviously, I do not know if Capital One tasked the collection agent to negotiate on its behalf, or sold the collection account. An inexact way to learn who owns the account is to pull a free, no-cost, no-gimmick credit report from one of the consumer credit reporting agencies at AnnualCreditReport. If Capital One is listed as the owner and the report is accurate, then there is your answer. Likewise, if the collection agent is listed as the creditor.

      The only insight I can offer is Capital One tends to not sell its collection accounts. (I am certain some Bills.com readers have anecdotal evidence to the contrary.) My guess — note that word choice — is Capital One trained its customer service representatives to say, "We sold your account to Collection Agent X," to get their customers off the phone and negotiating with Collection Agent X, even though Capital One still owns the account. Saying, "We sold your account to Collection Agent X, go talk to them," is much easier to say than, "Capital One hired Collection Agent X to negotiate a settlement on our behalf with you for your delinquent account. Capital One still owns all rights to your collection account, but wants Collection Agent X to deal with you at this time. Go talk to them."

      Of course, Capital One could be telling the truth, and the collection agent could be using the "We need to talk to Capital One about this settlement" excuse the same way that car salesmen use the "I need to get an approval on this deal from my manager," as a good-cop, bad-cop negotiating tactic when selling a vehicle.
      0 Votes

  • 35x35
    Feb, 2011
    Jim
    Hi Bill, Back in September 2010 I settled all of my credit card debts. Now I'm facing problems with my TransUnion Credit Report showing some of the debts as collections/chargeoffs when I clearly settled those accounts. They are the only one of the 3 Bureau's showing the accounts as collections/chargeoffs. I filed a dispute of the accounts with them as well as contacted the 3 Credit Card Companies. 2 out of the 3 said they would update the information as settled since that's what happend but the 3rd one is telling me no saying the account was chargedoff on October 27, 2010 but I have letter from them settling the account on September 24, 2010. The person I spoke with said he shows I settled on September 24, 2010 but it was after the chargeoff on October 27, 2010 so therefore they will not remove the chargeoff status. I explained to the person that September 24, 2010 was before October 27, 2010 but it fell on deaf ears. When I asked to speak with a supervisor he put me on hold then came back on stating his supervisor is busy but that she agrees they will not change status with Credit Bureau. I got into a heated argument with the person at this point because I had lost my temper. What else can I do other then disputing item with TransUnion as they are the only one of the 3 with it showing chargeoff? I don't want to have to get lawyers involved but I will if I have to.
    0 Votes

    • 35x35
      Feb, 2011
      Bill
      If you are stating that you settled the debt prior to the charge-off date listed on your credit report, it may be effective to speak to the creditor, working to have them request that the errant charge-off removed from your report.

      If that route does not work, I recommend that you speak with a lawyer who has experience working on violations of the Fair Credit Reporting Act.The Fair Credit Reporting Act (FCRA), is a federal law that requires consumer credit reporting companies to report accurate information.
      0 Votes

  • 35x35
    Jan, 2011
    Kim
    I have a Capital One Credit Card with a balance of $9,500. Due to job and pay cuts I missed some payments several months ago. I have made a payment each month for the last 4-5 months. After numerous calls to any department that will talk to me they will not consider a payment I can afford. They want an insane payment each month just to keep the account from charging off. Here are my questions... 1. If I've made 5 sizable payments in a row can they charge me off if I miss this month? or if I can't pay the amount they require this month? I can make a payment about 1/2 of what they want. Will it do any good? Are their threats empty? 2. I've sign up for a DMP to help eliminate this debt so I paid the DM company and now Capital One wants a payment too. I can't do both. What should I do? Stressed here...
    0 Votes

    • 35x35
      Jan, 2011
      Bill
      If you are enrolled in a debt management plan or a debt settlement program you stop paying the creditor. Your DMP provider should handle the communications with Capital One for the duration of your plan. Call the DMP company immediately and inform it Capital One is still contacting you. If the calls do not cease from Capital One, then the DMP company is not doing its job and you should find another provider.
      0 Votes

    • 35x35
      Jan, 2011
      Kim
      I guess I wasn't very clear on the situation. I just enrolled in the DMP in January 2011 and the creditors will receive their first payment from the DM company on Feb. 15th. Proposals have been sent and Capital One has not responded yet. They want a payment by 1/26 of $360 to keep the account from charging off. I'm not sure how they can charge me off when I've made 5 consecutive payments in a row. I can make them a payment of $150 or $200 this month but $360 is impossible since I started paying the DM company also. I spoke to the DM company yesterday and they will contact Capital One on Monday 1/24 to verify they received the proposal and try to negotiate participation in the plan. I guess the main question is can they charge me off even though I've been making payments to them regularly (if I don't pay the entire $360 by 1/26)? The statement does show the amount past due of my missed payments in early 2010. They will not consider a reage... I've asked numerous times.
      0 Votes

    • 35x35
      Jan, 2011
      Bill
      Charge off is an accounting practice, and does not change the legal status of an account. In practice, a charged-off account moves from the current accounts call center to a call center devoted to working on delinquent accounts. For consumers wanting to reach a settlement on their accounts, charge-off gives them the opportunity to speak with a person who has the flexibility to create and accept a settlement for less than the full balance.

      Charge-off can appear as a notation on a credit report, which is perhaps why people fear charge-off and seek to avoid it.

      Charge-off is a federal policy set by the Office of the Comptroller of Currency and the FDIC. It is a policy and not a hard-and-fast rule that gives credit card issuers and mortgage servicers flexibility in deciding exactly when an account can and should move from the current-account ledger to the delinquent ledger.

      Regarding your question, if you are delinquent in your payments beyond 120 days, your creditor may choose to move your account to the charge-off/write-off/delinquent accounts ledger. Your making a partial payment does not prevent it from taking such an action.
      0 Votes

    • 35x35
      Feb, 2011
      Abbey
      I wonder if you can help me. My fiance and I are trying to pay off his debt. he has a lot of charge offs on his account.(5) We want to try the pay to delete. My first question is for example capital one says charge off balance 0 because they sold the debt collection agency. If i pay the collection agency and they agree to pay to delete. Can I then call capital one tell them i paid the collection agency and ask them to then delete the charge off? Next question. With the items on the report that arent charged off but are just listed as collections can they be paid to delete like the charged off accounts? Last question. If i none of the accounts agree to pay to delete and I pay them off anyway and they are marked paid in full or settled..will that help his credit? his credit score is horrible it is 517..if we pay them all off and they are marked paid will our credit move up before 7 years? Thank you so much! We want to eventually buy a car in a year or two.
      0 Votes

    • 35x35
      Feb, 2011
      Bill
      Before I address your questions, allow me to address what may be a misperception. There is no "marital credit score". Spouse A can have a top credit score, and Spouse B may have the lowest possible score and the two scores will never merge as long as the two do not have joint accounts. Also, a married person can enter into a loan contract by him or herself. Now onto your questions

      The creditor must report accurate information. If you pay off an old account that will be reflected on your credit report, either as paid inf full, settled, or whatever notation the CRA uses. Your question about what impact paying an old, delinquent account will have on a credit score is a tough one to answer. There are two schools of thought on this:
      1. Paying-off an old delinquent account will decrease a credit score because the current activity on the old account will increase its weight in the credit score calculation
      2. Paying-off an old delinquent account will have no effect on a credit score because the damage caused by the delinquency was long ago, an subsequent remedial activity is either not counted or is outweighed by the delinquency.

      My guess, note that word choice, is that subsequent remedial activity is a net positive because it shows a human taking the time to review the report that the consumer hit a bump in the road, and has subsequently cleaned up their financial act.

      One important point: It is smart to try to clean up the old messes, but it is even smarter to practice good credit hygiene now to show recent and current positive activities.

      0 Votes

    • 35x35
      Feb, 2011
      abbey
      Thank you so much for your response. I just wanted to know. If we get the creditors to pay to delet and it deletes off the account is it like it was never there? Will the credit score move up once these are deleted? Thank you again
      0 Votes

    • 35x35
      Feb, 2011
      Bill
      Once a tradeline is deleted, it is as if the tradeline never existed and the consumer's credit score should see an immediate boost.
      0 Votes

    • 35x35
      Feb, 2011
      Carlos
      I have a charge-off for $8999. It it the remaining balance due after an auto reposession. A note on my credit report stated the charge-off would be removed in 09/13. What is a reasonable offer to make for a "pay for delete?" Or would it be more economical to just wait for the charge-off to come off my report? Thanks for your help.
      0 Votes

    • 35x35
      Feb, 2011
      Bill
      Just because the debt can no longer be reported on your credit report does not mean a collection agent may not try to collect the debt from you in the future. Also, even though it may not appear on your credit report, that does not mean your state's statute of limitations has run for the debt.

      If the original creditor sold the debt to a collection agent, then you have a great deal of price flexibility. The collection agent probably bought the debt for pennies on the dollar, so start your negotiations at 10 cents on the dollar.
      0 Votes

    • 35x35
      Feb, 2011
      Carlos
      Thank you for your advice. I have one more question regarding negotiating a pay for delete in reference to a charge-off. My debt has not been sold to a collection agency but it still being held by the orginal creditor, a credit union. I have heard it might be more diffcult to settle a charge-off with the orginal creditor. Is this true? Or are there other things to consider when negotiating with the original creditor and/or a credit union? Again this debt has been delinquent for 4 years.
      0 Votes

    • 35x35
      Feb, 2011
      Bill
      Creditors are obligate to report accurate information to the CRAs.

      Given that the debt is almost certainly charged off, the negotiator at the the credit union may have flexibility to negotiate a lump-sum settlement for less than the balance due. On the other hand, this is not like a situation where a collection agent bought the debt for pennies on the dollar, and paying the collection agent 40 cents on the dollar results in a handsome margin. You may be able to negotiate the credit union to 40-60 cents on the dollar, but you will not know that until you talk to the negotiator.
      0 Votes

  • 35x35
    Oct, 2010
    Jack
    My wife and I learned our new home was infested with toxic Chinese drywall and was making our family sick. We had to move out and ended up in lots of debt trying to pay for two homes. In May 2009 we gave up on trying to pay the credit cards. The credit cards have been charged off and are with collection agencies. I would like to see if I can settle these rather than file bankruptcy. Do I contact the original bank or the most recent collection agency? How do I know the collection agency owns the paper or has a proper assignment? Does the collection agency have the ability to delete the bank's reporting to my credit report? If I can't get a delete, what is the best wording for them to report for credit score purposes? I need to get them to accept 15%. Is this possible? Thanks.
    0 Votes

    • 35x35
      Oct, 2010
      Bill
      I will assume you have representation to deal with the defect in your home, and will ignore that issue. You are wise to ask for a debt validation. If the collection agent can validate the debt properly, then start the negotiation process. As you suggested, collection agents buy unsecured debt for pennies on the dollar. Regarding the collection agent accepting 15 cents on the dollar, that depends on what the collector is willing to accept and your skills as a negotiator. If you can offer the collector a lump-sum settlement, then your chances of success are much higher than if you want a payment plan.
      0 Votes

  • 35x35
    Oct, 2010
    Bill
    Why is there an error on your credit report? Because creditors report erroneous information to the credit reporting agencies all of the time, and the credit reporting agencies are imperfect and make errors too. Read the Bills.com resource Correct Credit Report Errors to fix the erroneous information.
    0 Votes

  • 35x35
    Oct, 2010
    Osvaldo
    I settled on one of my accounts long time ago. It was charged Off but right after I made an arragement to pay the a $100 a month until the original debth was paid in full which I did. My Equifax credit report shows "Charge Off Balance $0 Past Due $0. My question is why this account continued to report 180 days late until beginning of this year even though it was closed?
    0 Votes

  • 35x35
    Jul, 2010
    Bill
    It is not good but not terrible. This shows what you suggest -- the account was charged-off and then settled.
    0 Votes

  • 35x35
    Jul, 2010
    T&S
    I know that charge offs are not good but I settled on one of my accounts. My Equifax credit report shows "Charge Off Amount $0." Is that a good thing or bad thing to have on your credit report? I mean it doesnt show an amount so I am confused.
    0 Votes

  • 35x35
    Jun, 2010
    Bill
    Someone charged your account, but if it was not you then you are a victim of identity theft. Close the account in question, because obviously Discover is not siding with you on this matter. Read the link I mentioned to learn the other steps to take.
    0 Votes

  • 35x35
    May, 2010
    Me
    I had a credit score of 804 and have never paid a legitimate bill late. In 2009, I had a fraudulent charge of $500 show up on my Discover card. I paid off the entire bill that I did owe and disputed the fraudulent charge. Discover took it off but put it back on when the biller "verified" it. The verification was fraudulent and the signature was forged. It was 2500 miles from me! I refused to pay the fraudulent charge and sent them obvious proof that it was fraudulent. Now, they have put an $800 charge off on my credit report. My score is still over 700, but the charge off prevents me from getting as much credit as I should get. How can a person stop big companies from allowing this kind of fraud? I almost have to pay the fraudulent charge just so it doesn't cost me thousands in interest rates. What a scam. It seems to me innocent consumers are helpless.
    0 Votes

  • 35x35
    Mar, 2010
    Bill
    Credit reporting and scores are very complex. It is difficult for me to say whether settling the debt will result with an immediate improvement in your credit score. Generally speaking, the sooner a debt is paid off the sooner one can begin to repair their credit. If you have sufficient funds to settle the debt, it may be in your best interest to do so. Please visit the Bills.com web resource page Credit Help Information & Resources to learn more.
    0 Votes

  • 35x35
    Mar, 2010
    Max
    We completed a short sale of a house for which we had a first mortgage and a home equity line of credit. The bank owning the first mortgage reported the account as "settled, less than full balance" and the bank owning the HELOC began reporting the account as charged off as of the date of the short sale and we agreed to monthly payments (no interest accruing) to resolve the remaining balance. Our credit score dropped by about 150 points. The HELOC just offered a 40% settlement, to be reported as "settled, less than full balance." It sounds from the main article above that settling the account is better for our credit than continuing to pay under the agreed plan with the HELOC. Is that correct? We knew that our credit would take a hit as a result of the short sale - we're know trying to determine the best and quickest way for it to recover. Thank you.
    0 Votes

  • 35x35
    Dec, 2009
    Bill
    If you are ever a victim of identity theft or a fraud like you described again, go to FTC's Identity Theft Web site and take the steps described on that Web site. DO NOT simply pay the fraudulent charges. As to your question, I do not understand the facts you presented. You say that you paid the bank $469, but the bank is now saying you did not? If that is the case, the bank is mistaken and you would be wise to take your business elsewhere.
    0 Votes

  • 35x35
    Dec, 2009
    Roberta
    About 2 years ago,My Bank sent me a letter,stating that I owed about $469 dollars to them,for electronic billings from merchants to my account,I never bought anything,from anyone,it was done by people commiting fraud on me, Well,I eventually went to the bank, and I paid them off in full,and I opened a new account with them. but now it seems that I was reminded of my old debt, as a charge off by the bank,just because I applied for for a credit card from the same bank.is that a good bank to do business with?.
    0 Votes

  • 35x35
    Nov, 2009
    Bill
    If my math is correct, your son has received an offer to settle the account for 20 cents on the dollar -- a good deal for him. Get the settlement in writing, and be sure to keep copies of the settlement in several safe places. A settlement is that -- the remaining balance in canceled or forgiven, depending on your choice of words. Under federal tax law, forgiven or canceled debt is considered income for tax purposes. Accordingly, a creditor is required to submit a 1099C to the IRS for any debt forgiveness exceeding $600 in value. Therefore, a consumer would be wise to consult with a certified tax preparer, CPA, or tax attorney with respect to the implications of being taxed on the forgiven debt. See the IRS page Cancellation of Debt.
    0 Votes

  • 35x35
    Nov, 2009
    Mark
    I am assisting my son in settling a credit card debt he owes US Bank. He was offered a settlement on a $24,489 US Bank credit card for $4989. If paid the bank states that they will no longer be collecting on this debt. The account will be reported to credit bureaus as "charged off/settled in full". Is this a good offer? Secondly, does this mean that if the bank sold this debt could he still be liable for the remaining balance? And what liability does he have to the IRS if the Bank sends him a 1099 form?
    7 Votes

  • 35x35
    Jul, 2009
    Bill
    You could get what is called CODI, or cancellation of debt income. This is considered taxable income (you could get a 1099 from the IRS), if you are not insolvent. When you file your taxes, if you get a CODI 1099, be SURE to ask your tax preparer about form 982. If you are insolvent (which many people with sizable debts that they cannot pay are), then you might be in the clear! Hope that helps.
    0 Votes

  • 35x35
    Jul, 2009
    James
    I am currently settleling a charge off from BOA. I owed $12,500 and they are acceptting $4000 . The question came up about tax issues. I was told I may get a 1099 for the differance. What can be done with that?
    0 Votes

  • 35x35
    Feb, 2009
    Bill
    It would first be an entry by Capital one saying it has been charged off. Once you settle it with the collection agency, that particular entry will say "Settled/Paid in full.
    0 Votes

  • 35x35
    Feb, 2009
    Marzena
    I have recently settled several credit cards, but have been unable to settle a personal, unsecured loan from Capital One. When I ask to speak with the hardship department, they say they do not have one. They will not negotiate the minimum amount or the interest rate. I stopped paying three months ago. I am definitely unable to pay the balance or even the minimum payments at this time. The situation may change in three or four months ( I have some medial and other payments to do). If they charge off my account and I settle with the collection agency - what information will I have on my credit report - charged off or settled?
    0 Votes