Settlement figure?

gchapman

Hi there,

I read a post earlier discussing that you could haggle a settlement figure from your creditors and that you could use it on credit cards.
My questions are.....

A, Will it affect my credit rating if I haggle a settlement figure which is at a reduced rate to what I actually owe?

B, Does a settlement figure mean that you have to close the card and have no more dealings with them or will it just take you limit back to zero and still keep the card?

C, I am borrowing enough money to do some balance transfers on my cards (which are all at there limits.. Egg, BC, Capital1), can anyone recommend a process to get the best deal?

thanks

Xbigman

Sorry but you seem to have totally the wrong idea about this. Full and final settlements are for those in debt and unable to pay it off. The card company agrees to write off the debt for a partial lump sum payment. Yes it affects your credit rating but nearly all people in this position have a poor credit rating by this time anyway. You definately lose the card.
Regards



X

dag_2

I'd refer you to the debt free wannabee board.

If you have a realistic chance of transferring balances, either because you still have some available credit, or because you're likely to be accepted with a big limit if you apply for any new cards - then you don't want to be making final settlements. It will harm your future credit prospects.

But if you don't have any other option - you don't want to be ripped off in the process. The debt free wannabee board is good for that sort of thing.

gchapman

OK, my credit rating is pretty poor anyway and I have not been making payments on time so I am unable to pay them generally....
But how does a settlement figure affect your credit rating - what does it say, I'm a bad person for paying off my debt in full???

mountainofdebt

you have borrowed money that you are unable to pay back. The powers that be agree to settle your debt for a proportion of what is actually owed - hence you haven't paid back in full - the powers have decided to cut their losses.

Now how do they warn other lenders that (statistically) you are a bad risk?

Via your credit rating perhaps?

If you pay off your debt COMPLETELY then obviously its a different kettle of fish.

gchapman

Yes I understand that but I'm interested to know what it actually says on the credit report??
In other words does a report showing late credit card payments look worse or better than if the report was showing amount settled?
Similarly I wonder the comparisons on a scale of 1-10 are between:

Default Notice
Late payments
Agreed Settlement
0 balance - card closed
0 balance - still open

Thanks

gchapman

does anyone have any ideas?

Thanks

Xbigman

On a credit report entry for credit card accounts, you get a string of numbers and letters usually 30 of them going back 30 months. Each letter or number means something different. One for missed payment, one for late payment, etc. Different lenders use different scores for each rating. Some lenders take a dim view of late payments, others don't care as long as you pay. The same applies to Defaults. If you have a settled default some lenders almost ignore it whilst others treat it as being as bad as a default. If you want a mortgage they all treat everything as bad.

Or put another way, there is no straightforward answer to your question.

The solution is the same in all cases.

First step is to pay everything you have to on time and keep all your accounts in good order. Settle anything you have defaulted on ASAP.

Second step is to write to everyone concerned and get your credit file amended as far as they are prepared to go. Some will remove entries, some will simply update them.

Third step. If the second step fails to get your credit history clean then you have six years to wait and little you can do about it except stay clean.
Regards




X

gchapman

Thanks for that. I just wonder if there is any difference though.... you say settle your defaults/payments outstanding.... Do you mean get back within your limit or is it better to close a card completely if you've had late payments/defaults on it?
when people say haggle for a settlement figure to close the account (if your struggling)... why would it look bad on your credit file, surely it wouldn't? Would it not just say the same thing as if you had closed the card in normal circumstances.... something like 'Account settled and closed'? Or.... do you think it might say something like 'Settled on agreement - not paid off in full'?
You've still put the effort in to clear your debts though?
My mum may be kind enough to help with my credit cards but do I get her to pay off the full amount owed or do I haggle a lower amount if I can?

Stevenj214

like has been mentioned if you don't pay off the balance in full, it shows that you are not a good person to give credit to as you cannot manage your debt which will affect your ability to get credit at a later date

Reaper

gchapman wrote:

is it better to close a card completely if you've had late payments/defaults on it?

It doesn't make any difference whether you close it or not. The missed/late/unpaid statements stay on your record for 6 years.

'Account settled and closed'? Or.... do you think it might say something like 'Settled on agreement - not paid off in full'?...

Why don't you get your credit reports? They should come with an explanation. Here are a few quotes from the Experian one:

Credit accounts status: Can be Settled (that means repaid in full), Active, Defaulted (broke credit agreement, will become "Satisifed" if eventually paid), Delinquent (3 months late or more making payments)
Status history: Can be Up to date, 1 month late .... up to 6 months late, Defaulted, Unused, Unknown

In addition there are also some extra notes which can be added to your account. The one which of most interest to you is "Partial Settlement" which includes "a samller amount has been agreed and accepted as full or final settlement of the account".

Will that last one damage your credit rating? Yes, absolutely. Who wants to lend to somebody who doesn't repay them in full? However it is not as serious as failing to pay at all.

In summary if you fail to pay your debts it will affect your credit rating. An agreed default will badly damage it, though not as badly as an unauthorised default.

An agreement is not the easy way out. You need to convince them you can't pay and that their best option to recover some of their money is to negotitate a deal. You also have to accept that it will be very hard to get any more credit for a long time, except at very poor rates of interest.