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When settling a debt in collections how does it appear on CR

Submitted by mojo on Tue, 03/02/2010 - 10:18
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1.When settling a debt in collections how does it appear on CR?

2. I understand a debt in collections sticks on the CR for 7 years even though it is settled, and for some reason this hurts your credit score more, than if you settled before charge-off?

3. Is there a difference in reporting to the CR if you settle an account with a 3rd party collector before charge-off vs. settleing it with the original creditor before charge-off ?

4. Is there a difference in regards to CR, when settling with OC after charge-off with internal collections? Like with capital one (from what I've been reading)?

Thanks


Please see answers below:

.When settling a debt in collections how does it appear on CR?

Answer: The trade line (creditor as listed on the credit report) will show that the account was settled for less than amount due, paid and closed - Not "paid in full" as it would if you paid the debt in its entirety.

2. I understand a debt in collections sticks on the CR for 7 years even though it is settled, and for some reason this hurts your credit score more, than if you settled before charge-off

Answer: It is important that you understand that a credit report is an ongoing report of your credit HISTORY. If something on your credit report is true, accurate and can be certified it will remain on your credit report as such. If the account was "written off" as a bad debt from, let's say, Orchard Bank, then it will remain on your credit report as a charge-off. Once Orchard bank writes off that debt as a charge off, they then sell it to a collection agency (ABC collections for this example). ABC Collection Agency now has the legal right to report your debt to the credit reporting agencies. Now you have a "charge off" through Orchard Bank and a trade line reporting as a collection through ABC Collection Agency. Because you have two negative tradelines as opposed to one, it will your credit accordingly. The more that debt is sold off, the more negative tradelines you will have and the worse your credit. If you were to arrange a settlement with Orchard Bank before it was "charged-off", it would have never reached "charge-off" status and the subsequent negative tradelines would not exist therefore avoiding a much worse credit rating. I hope that makes sense.

3. Is there a difference in reporting to the CR if you settle an account with a 3rd party collector before charge-off vs. settleing it with the original creditor before charge-off ?

Answer: See above. Same rules apply. Always settle with the original creditor if possible for the best CR status.

4. Is there a difference in regards to CR, when settling with OC after charge-off with internal collections? Like with capital one (from what I've been reading)?

I am not sure what you mean by "OC". Please revise the question and I would be happy to advise.
Thanks


Submitted by admin on Mon, 12/17/2018 - 05:45

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