February 9
Will a credit card settlement affect my credit score?
I have a credit card with Citibank and they mailed me a settlement letter for 65% of the amount. I can pay it in full. Will this affect my credit score? Is is the same as a collection account?
Legal obligation or not it still looks bad on your report and will still harm you score. Also, the credit report doesn’t say how much you settled for! It simple has a sentence that says something like: settled for less than full balance. It will show a zero next to the amount owed but any loan officer will see that as a red flag.
Esquire [Credit Analyst]
Yes, it is a collection account even if paid.
How long has it been since your Citibank account became delinquent?
If it has been more than 180 days, Citibank is no longer in the picture. The account was written off to P&L and sold to a junk debt buyer collection agency.
It takes 7 years for the original write off to clear your credit reports.
It also takes 7 years from the original date of delinquency for the collection agency entry to clear your credit report.
By law, anything reported about you to the credit bureaus has to be true, otherwise it has to be removed. A derogatory trade line is still a derogatory trade even it it is marked “paid in full”.
Check your state’s statute of limitation on open accounts (credit cards). If the debt is past statute, you no longer have a legal obligation to pay.
- If you are current on your payments, then taking the settlement will really damage your credit rating
- If you’re already so far behind that your credit card company is offering 65% settlements, then your credit score has already been greatly damaged anyway….If taking this settlement prevents the card from being charged-off as bad debt, then taking the settlement is a lesser evil for your credit rating…
. From the inputs you have provided it appears that you have defaulted in settling your credit card dues with the bank.If the bank considers you as defaulter even after settlement it might affect your credit score. Now a days banks are maintaing a data called CIBIL data.If your name appears there as a defaulter or as debtor whose dues have been recovered on compromise settlement, surely it will affect your credit score. It may not be in real sense. But if you go to another bank and ask for a loan/credit facility definetly they will say ‘ no’ because they now know that you are a defaulter in some bank and your dues were recovered on compromise settlement.
Try to pay the balance in full if possible.
( in simple language ) I would recommend not to pay it in full if you have not made a payment for more than 6 months.
The damage has already been done.
If i were you i would negotiate much more and try to settle it for 50% as now saving money is important.
Once i settle it , i would wait for it to be updated on CIBIL.
Then would try to get a CIBIL Report by paying 142rs.
If not updated that settled then would send a copy of the letter to CIBIL to get it updated.
If any consolation , Credit reports in india now are getting fully fledged and it would take another 2 years for bank like CANARA , ANDHRA and some more nationalised banks check cibil scores.
My dads manager in canara thats how i know that they are still not checking.
But, dont be negative , think in a positive way.This would atleast give u a good understanding of how to manage credit in future.
All the best.
If this settlement offer is actually from Citibank and not a third party collection agency, the account would be reported to the credit bureaus as charge off/ settled — a negative that would remain on your credit report for 7 years. You will also receive a 1099 for the forgiven portion which will have to be included on your income tax return.
If the account is with a collection agency, your credit has already been damaged and paying will not help your score.
You can use this credit monitoring service to pre-estimate future scores for different scenarios of such payments – creditreport.imess.net
Any settlement will effect your credit score for 7 years.