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What would be best for credit score?

Posted by terriks (My Page) on
Fri, May 22, 09 at 16:40

My almost 30 year old son really messed up in his early twenties and has a pretty bad credit score - he checked it on Annualcreditreport.com and it was 567. (I know that's not a real score, but guess it's pretty close). Anyway, my question is what should he do about an old Discover Card account that has gone to collections. The original balance was $1200, which eventually grew to $2700 with interest and penalaties. The collection agency will accept $600 to close it out. He last made a payment on the account in 2006. Which will be more helpful to his credit: pay the $600 now, or wait it out until the account falls off his report, which I guess would be 4 more years?


Follow-Up Postings:

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RE: What would be best for credit score?

Is this only problem? Other CC problems etc. My son is going thru this with CC and he is waiting until the situation goes to court and then could appeal the judgement or make payments. If the collection agency accepts 600.00 will there be additional fees. I think he needs some legal advice. Collection angencies do collect again and again and again, and even sell the collection to other agencies. That is why he is waiting for a legal court desicion. On his credit report, are their other problems? are all the loans his? If he does not have the money for advice for a lawyer, there are state agencies that will give him help for less. I would not pay anything until he gets some correct information. Like I said, just paying the 600.00 may not pay it off, but either way his credit is not good for several years.


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RE: What would be best for credit score?

If he decides to pay, make sure that he gets it in writing before handing over any money. The question would be what the credit report would then show and how long it would continue to be on there. If he gets a letter stating that this will close the account, he needs to keep the documents for a very long time so that he can prove that it was settled (including proof of receipt). If he pays with check, keep a copy of the cancelled check and under no circumstances give them a debit card number. Good luck to your son.


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RE: What would be best for credit score?

Ignore the collection agency who might or might not be valid.

Have your son call Discover and find out what their "Charge Off" (payoff) is then, pay Discover directly.

At least going directly to the source you know any payment is going on the debt.

Either way, he has to clear this up THEN, once paid for, there are at least 7 years before it falls off his credit report.

If you dont pay a bill, the people your son owes have an open balance and can come back to haunt him at any time.


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RE: What would be best for credit score?

If you dont pay a bill, the people your son owes have an open balance and can come back to haunt him at any time.

I don't think this is true (at least not according to what I've heard Clark Howard say). I thought that creditors could only go after you for 7 years after you last had a transaction with them. If someone knows for sure, let me know.
I think that this debt is off of Discover's books now, as they have turned it over (sold it?) to a collection agency.


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RE: What would be best for credit score?

Gammy:

Discover has sold this account to the agency, meaning that they have already written it off for tax purposes. They no longer have any legal ability to take the money, as it is now owed to the collection agency, not Discover.

That said, the best thing for his score will be to man up and pay it, but only after receiving written confirmation from the agency that the collection will show as paid in full on his credit report and that the remainder of the debt will not be subject to collection. It was already alluded to, but he should only pay them via money order or cashiers check. He should not send them ANYTHING that contains his bank account number, debit card number, etc.

And yes, he needs to keep that paperwork FOREVER.


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RE: What would be best for credit score?

I think there is a moral component to this.

Ya used credit card(s) to buy stuff you may or may not have needed - isn't the right thing to do is pony up and pay for the stuff you may or may not have needed?

Unless there are very extenuating circumstances (like medical bills, etc.), responsible citizens honor the agreement they made with the credit card companies who extended them credit in the first place. Honoring the agreement made means paying for what you owe, and not trying to figure out ways to get out of paying what they owe. A debt is a contract and a contract is a promise.


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RE: What would be best for credit score?

It is true that the credit card holder is responsible for expenses he or she incurred. It is also true that many credit card holders have spent more than they can afford.

But it is also true that the credit card companies have charged outrageous interest rates, penalities for late payments, and engaged in other abusive practices. Congress has recently passed a bill that will make it more difficult (but unfortunately not impossible) for credit card companies to engage in grossly abusive practices.


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RE: What would be best for credit score?

Haus proud - if you're responsible and pay your credit card charges monthly you don't have to worry about outrageous interest rates, penalties for late payments, or being a victim of abusive practices. Except for very unusual circumstances (medical bills, loss of job etc.) none of which the OP mentions, is there any reason to not pay off your credit cards at the of the month. Unless you're using CC's to look like you have more or buy stuff you don't need.

I pay off my credit card at the end of each month so outrageous interest rates, penalties for late payments, or being a victim of abusive practices don't apply to me or anyone else if they're used properly.


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RE: What would be best for credit score?

I think there is a moral component to this.
Ya used credit card(s) to buy stuff you may or may not have needed - isn't the right thing to do is pony up and pay for the stuff you may or may not have needed?
Unless there are very extenuating circumstances (like medical bills, etc.), responsible citizens honor the agreement they made with the credit card companies who extended them credit in the first place. Honoring the agreement made means paying for what you owe, and not trying to figure out ways to get out of paying what they owe. A debt is a contract and a contract is a promise.

Agree, we each have personal responsibility, regardless of what other's (CC companies) do. If one does not like the practice of a credit card company they needn't accept the them.


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RE: What would be best for credit score?

I totally agree about the moral component, and am very disappointed that my son is in this position. I have to tell you though that back in 2006 my son tried to deal with Discover card by offering to pay them at least the original balance of $1200, but they would not discuss anything with him until he was behind on his payments by several months. He then spent a year in school in Germany (he has been putting himself through school since he was 24 and finally graduates this year). I think that during that year they closed his account and sold their interest to the collection agency.

I did raise my kids to be honest and to honor their commitments. I wouldn't even let them eat grapes in the grocery store that we hadn't paid for yet when they were young, or pay a child's ticket price at the theater after they had turned 12 (or whatever the adult age was) even when they looked younger. Unfortunately my son made a few bad decisions and the fees and penalties on this account more than doubled his original charges.

I was really just curious on what would be better for his credit score, because I know that sometimes people end up being penalized when they are trying to do the right thing.


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RE: What would be best for credit score?

Hi terriks, I didn't mean to make you feel bad, my apologies if I did. I think I was more referring to everyone else's responses that sounded like attempts to get out of paying. I can relate to not eating grapes in the grocery store - I had my hand slapped a time or two when I was a kid. LOL. It sounds like your son definitely got himself together to be able to study in Germany, and it sounds like he's obtaining advanced education. We all mess up at sometime in our lives.

Sephia


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RE: What would be best for credit score?

terriks,

Just a quick thought - what is your son doing about figuring out how this will affect his credit score or what will be his best course of action for his future?

If he is almost 30, I think you should step out of it and let him figure it out on his own unless he is asking you for advice. And even then, I would encourage him to do this research for himself even if you are educating yourself on the side.

He is of an age that he should be handling this stuff himself and figuring this out on his own, even if he makes a mistake.


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RE: What would be best for credit score?

If he is almost 30, I think you should step out of it and let him figure it out on his own unless he is asking you for advice. And even then, I would encourage him to do this research for himself even if you are educating yourself on the side.

He is of an age that he should be handling this stuff himself and figuring this out on his own, even if he makes a mistake.

You are absolutely right. I am just kind of a research junkie, and love getting answers to questions for myself and others.


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RE: What would be best for credit score?

If your son decides to pay the $600, he would need to not only obtain a written promise that the remainder of the debt is no longer his responsibility; but he should also obtain a written promise that the collection agency will remove all reference to the debt from his credit report at ALL THREE credit reporting agencies. It won't help his credit score much to show that he only paid less than 25% of his total debt and the rest was a loss to the credit card company. Not many potential creditors want to risk losing more than 75% of what your son may eventually owe to them. Yes, they will see that part of the debt was paid and he doesn't have to pay any more, but it "speaks louder" that he still reneged on his obligation.


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RE: What would be best for credit score?

Would a collection agency actually agree to that? I didn't even realize they document that specifically when a debt is paid off on a CR.

I have never really had to deal with a collection agency, but I just hear how pushy and viscious they can be...so it is surprising to hear they would be so generous about credit reporting. I'm intrigued!


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RE: What would be best for credit score?

Credit reports show the creditor, type of account (mortgage loan, auto loan, revolving credit, student loan, etc.), account number, total credit limit, highest amount owed, and a payment history (how many months "you" have been 30, 60, 90, or 120 days late with a payment). It shows the date the account was opened; and if it's now closed, the date and reason. Basically, if it's a loan, it shows that you paid it off. If it's a credit card that is no longer open, it will show the date closed and the reason for closure -- whether the creditor closed it or the customer closed it. And, it will show if there is a charge-off, and the amount of any charge-off.

And, yes, creditors and collection agencies will agree to remove all negative references to an account. They won't OFFER to do this -- you have to ASK them to, and reach an agreement for them to do it. And always, Always, ALWAYS get that in writing.


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RE: What would be best for credit score?

Thanks Linsdey, I will pass that information on.


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