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Message
Should I settle a collection debt?
Posted on 1/19/15 at 8:53 pm
Posted on 1/19/15 at 8:53 pm
I owe $700 on an old account due to some bad decisions in my twenties. I've had this debt for over 10 years, but couldn't remember what the company was. I moved around several times since then, so they never sent me anything(that I got.) I tried to get my financial shite together a few years ago, but couldn't never find the debt. I guess it kept getting sold to other debt collectors.
I am currently buying a house--have been pre-approved for the loan and a re closing in the next month. Out of the blue, today I get a letter from owner of said debt offering me a 50% settlement. What should I do? If it's better to pay in full, I can do that, but don't want to pay $700 when $350 would settle it and have the same effect on my credit. What's the rule/guideline for such things? TIA
I am currently buying a house--have been pre-approved for the loan and a re closing in the next month. Out of the blue, today I get a letter from owner of said debt offering me a 50% settlement. What should I do? If it's better to pay in full, I can do that, but don't want to pay $700 when $350 would settle it and have the same effect on my credit. What's the rule/guideline for such things? TIA
8
Posted on 1/19/15 at 8:59 pm to Hot Carl
Pay your debt. You won't regret it.
Posted on 1/19/15 at 9:17 pm to Hot Carl
If you got a letter, then its on your credit report. I'm surprised you didnt see it or werent told during the housing pre-approval.
Call them and tell them you will pay it at 50%. Get everything in writing. Tell them you want a letter stating the terms before any money is handed over.
If it's on your credit, then you are stuck either way.
Call them and tell them you will pay it at 50%. Get everything in writing. Tell them you want a letter stating the terms before any money is handed over.
If it's on your credit, then you are stuck either way.
Posted on 1/19/15 at 9:20 pm to Hot Carl
quote:
I've had this debt for over 10 years
Nature of the debt? Credit Card? Medical Bill? Promissory note? In Louisiana there is a chance it's prescribed if you haven't paid anything on it in over 10 years.
I would think if its prescribed they shouldn't be listing it on your credit report, but I'm not credit report expert.
Posted on 1/19/15 at 9:20 pm to HailToTheChiz
So, no advantage to paying $700 rather than the $350? I don't think it's going to affect buying this house, I just want to do what's best long term.
Posted on 1/19/15 at 9:24 pm to rmc
quote:
Nature of the debt? Credit Card? Medical Bill? Promissory note? In Louisiana there is a chance it's prescribed if you haven't paid anything on it in over 10 years.
I would think if its prescribed they shouldn't be listing it on your credit report, but I'm not credit report expert.
Yeah, I think the statute of limitations (or whatever it's called in this case) is long gone so as long as you never "reset the clock" by paying a little or admitting it's your debt, you should be good. It's not like the zombie debt collectors have the paperwork or anything.
Now, if you just want to be a stand up guy and pay it off, that's another story but you take the risk of having it stay on your report (or to be placed on it) as old/bad debt.
Disclaimer: Not an expert opinion.
Posted on 1/19/15 at 9:43 pm to Hot Carl
I had a similar situation with Avis when I wrecked one of their rentals in my early 20's (always buy the insurance or have coverage). They said they would contact me in regards to the vehicle repairs at some later date. I moved a few times and forgot all about it. Three or four years later I get a certified letter from a collections company offering me a 60% reduction of the amount I owed. I knew I owed it and paid it - I had just simply forgot about it. But it was literally the first correspondence I received from Avis.
Posted on 1/19/15 at 9:49 pm to Hot Carl
I don't think this is any longer a valid debt. If no activity ( charges or payments ) has taken place on the account in the past 3 years, there is a good chance the statute of limitations may have run. This does not stop the collector from trying to bully you in to paying. They buy these bad accounts for pennies on the dollar hoping to bluff people in to paying something.
Posted on 1/19/15 at 10:15 pm to Hot Carl
quote:
So, no advantage to paying $700 rather than the $350?
No. They are offering you the deal in hopes you pay something versus them fighting you for it
I don't know Louisiana law on reports. May not be valid but I don't know the law
Posted on 1/19/15 at 11:21 pm to Hot Carl
It will NOT go off your credit! Only show as a paid collection. No reason to pay if your loan is a go. The original debt was written off and claimed. Current debt aowner bought it for a few pennies on the dollar.
Posted on 1/20/15 at 7:15 am to GeeOH
Make sure you get it in writing that they are willing to settle for 50% of the debt. Otherwise they will come back on you for the other $350 at some point in time.
Posted on 1/20/15 at 8:22 am to HailToTheChiz
quote:
If you got a letter, then its on your credit report.
Not necessarily. If the account has been dormant beyond the state's statue of limitations, it would not be on the credit report.
Up to you whether you pay it, but it will show up on your credit as a paid collection if you do pay it. Not sure how negatively it will impact your credit in that case. The biggest concern would be if the original holder of the debt still has the right to take you to small claims court and get a judgment against you. In many states a debtor has 20 years to collect if they hold a judgment.
I went through this 10 or so years ago due to my idiocy in my 20's. I paid everything I could track down, but had a couple of accounts I could never locate, and one I still get occasional letters over for an old $50 balance on a cell phone. A lawyer friend walked me through the ropes and educated me on zombie debt and how they operate.
Posted on 1/20/15 at 8:34 am to GeeOH
quote:
It will NOT go off your credit! Only show as a paid collection. No reason to pay if your loan is a go. The original debt was written off and claimed. Current debt aowner bought it for a few pennies on the dollar.
Posted on 1/20/15 at 8:37 am to Hot Carl
quote:
Should I settle a collection debt?
1) What type of debt? Credit card, unsecured loan, student loan, etc?
2) Did it show up on your credit report when applying for the mortgage?
Posted on 1/20/15 at 8:41 am to The Spleen
quote:
Not necessarily. If the account has been dormant beyond the state's statue of limitations, it would not be on the credit report.
If it is not on his credit report then he needs to ignore the letters. No reason to give them the time of day. Sounds dickish but if not on his CRs then the statute has passed.
He needs to go pull all 3 credit reports for free to see if it is on there:
Annual Credit Report Dot Com
This post was edited on 1/20/15 at 8:44 am
Posted on 1/20/15 at 9:04 am to Hot Carl
This is what annoys me so much about the credit reporting system.
The "right" thing to do is to pay the debt. OP owed it, OP should attempt to make it right - if OP can afford to do so.
But, if the debt isn't on the CR, paying it will make it appear on the CR? Or, if it's old on the CR, paying it will make it seem new?
That is completely crazy.
A paid collection should not be made to appear newer. And a paid collection should hurt "less" than an unpaid collection.
The "right" thing to do is to pay the debt. OP owed it, OP should attempt to make it right - if OP can afford to do so.
But, if the debt isn't on the CR, paying it will make it appear on the CR? Or, if it's old on the CR, paying it will make it seem new?
That is completely crazy.
A paid collection should not be made to appear newer. And a paid collection should hurt "less" than an unpaid collection.
Posted on 1/20/15 at 9:13 am to LSUFanHouston
Yeah, like I said I went through it about 10 years ago. My credit score was around 650 when I decided to do the right thing and pay off a bunch of my stupidity from college. Most of the debts had fallen off my CR, but I paid them anyway. Score went down to the low 500's. It took over a year to get it back to 600 and another 2 years to get it back to the 650 range, and it stayed there until those paid collections dropped off 3 years later. Part of the problem was I only had 2 student loans and one small credit card to help bring it up.
Somehow with a low 600 score my wife and I were approved for a mortgage at a good rate, but this was before the mortgage crisis.
Somehow with a low 600 score my wife and I were approved for a mortgage at a good rate, but this was before the mortgage crisis.
Posted on 1/20/15 at 9:18 am to LSUFanHouston
quote:
A paid collection should not be made to appear newer.
That is a common misconception with credit reports. People think that paying a collection restarts the 7 years. That is absolutely false. The CRTP is 7 years since the date of last delinquency. You can still be sued for an amount of time after those 7 years (time depending upon type of debt), but the time of showing on your CR is still 7 years since date of last delinquency.
quote:
And a paid collection should hurt "less" than an unpaid collection.
In terms of credit score you will not see much difference. In the lender's eyes they see it more favorably.
quote:
But, if the debt isn't on the CR, paying it will make it appear on the CR?
No.
Edit: Apparently this did happen to Spleen above. I would've raised hell to get it removed.
This post was edited on 1/20/15 at 9:20 am
Posted on 1/20/15 at 9:34 am to mglsu21
Honestly I can't remember what actually showed up on the report. I'm not sure I ever even really looked. All I remember was my score dropping significantly when I paid them, and it going back up really slowly for 4 or 5 years, then shooting up. I assumed the paid collections had shown up, then dropped off. When I did pay them, the 7 year window had only recently passed on a couple, and a couple were still on there. Maybe that had something to do with it.
Posted on 1/20/15 at 10:01 am to Hot Carl
pay it only if they agree to delete the collection acct, if you settle or even pay it down to a zero balance it can actually hurt your scores afterwards. Deleting the acct is the only way to go.
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