Mom of Two asked:
We can pay off a big balance from one card or pay off a few credit cards with smaller balances. Does it matter since they are in default.
Rhonda
We can pay off a big balance from one card or pay off a few credit cards with smaller balances. Does it matter since they are in default.
Rhonda
Ron
If these are charged-off credit cards, it’s very important for you to realize that paying them off (even in full) will not undo the damage of a charge-off on your credit report.
If your cards have NOT charged-off, then do whatever you have to do to keep the accounts current so they won’t charge-off.
Don’t make the mistake of simply cutting a check to whatever collection agency has the debt for the charge-off and assume that your credit rating will be magically restored…Doing so will not remove it from your credit reports. It will simply be updated to a “Paid Charge-Off,” which, while slightly better, is still a seriously derogatory item. Per the Fair Credit Reporting Act, a charge-off, whether paid or not, can remain on a consumer’s credit reports for up to seven years.
Making recent payments on old charged-off debt resets the statute of limitations on the debt in many states…which would enable the debt collector to immediately sue you for the debt. In my opinion, this potential risk is the not worth the slight increase in your credit score from paying off old charged-off debt.
If you’re going to pay off old-charged-off debt anyway, then you might as well negotiate the lowest settlement you can possibly get, being that the negative charge-off notation is going to stay for 7 years on your credit report anyway. You have to be VERY careful in this effort…Mail them a vaguely worded statement like:
I am willing to settle this matter for 25% of the original amount. This is in no way an admission of this debt, but rather an attempt to settle this matter. Your firm must send me a written agreement on your company’s letterhead that you will accept this amount as “payment in full” and that this issue will be settled. Upon receipt of this agreement, I will mail you a money order for this amount.
Comment by Earl — May 7, 2010 @ 8:28 am
Tamara
Your best option may be to contact a credit counseling service. They can often help you reduce your debt by contacting the credit card companies and trying to reach an agreement whereby you can pay off the debt in affordable increments. They can even reduce the amount of debt in some cases to allow you to get debt free sooner.
The credit counselor has more clout than you do as an individual. You could try to contact all the card companies yourself and ask to do the same thing, but the counselor is practiced at this maneuver and knows just how to do it.
Beware of counselors who charge the debtor (you) a fee for the service. You local town or county services may include a counselor free of charge to you. Check and see.
Comment by Jeremy — May 10, 2010 @ 4:23 am
Lance
I don’t have the answer to all of your questions. However, there are some things that you CAN do to repair your credit. In fact, sometimes you can indeed get negative items removed; depending on the situation. This might be a good place to start.
I recommend trying the free course at They provide a lot of great information for improving your credit score, and it worked well for me.
Comment by Heather — May 12, 2010 @ 7:46 pm