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Pros and cons of delinquent credit card and settlement options.

If the bank reports the settlement as "settled as agreed" do this hurt your score?

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?

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Bill's Answer
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An account showing as "settled as agreed" will likely have a negative impact on your credit score. However, you must keep in mind that a "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

4 Comments

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  • BA
    Aug, 2009
    Bill
    The answer depends on the specifics of your agreement with the credit card company. For example, if your card issuer is your bank or credit union, you may have agreed to have a minimum payment withdrawn from your checking account if you don't make a payment by a certain day of the month. To answer your question, you need to read through the documents you signed when you opened the credit card account or when you started to transfer funds from the credit card account to your bank account.
    0 Votes

  • 35x35
    Aug, 2009
    samray
    In the past several years, I have on a couple of ocasions had my credit card co. transfer money directly to my bank account.I am now behind. Is there any way that the company could now pull money from my bank acct.
    0 Votes

  • 35x35
    Oct, 2007
    Nathan
    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.
    0 Votes

  • 35x35
    Oct, 2007
    Kerry
    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.
    0 Votes