How does settling credit cards effect credit score?

[shouldpayattn]

Here's the deal... I don't qualify for chapter 7.
I'm $30K+ in unsecured debt.

Family is sick of seeing me worried and stressed out over not being able to make minimum payments and have anything left over for family and are willing to help me out (thank God for loving family). I've never made it a habbit of taking help, but I don't see a way out this time. They have offered $20K to help get me back on my feet with the (proper) expectation that I will hussle and get the other 10 paid off and learn from my experience.

I've struggled to keep all the bills current, but have recently went 30-days behind on 2 different cards. I called to see if CC companies would accept any kind of reduced amount. I want to pay for what I used, but asked about knocking off the interest on a few.

I have one that is owed 10,500 and they siad they'd take $9,500 mark the debt as settled and close my account. I have a second account with them with a $4000 balance and they said they'd take $3,700.

My interest for just the past 6 months or so is more than this, but at least it's something. Should I do it? How will it alter my credit score that is currently 672? And how long would it stay down? I don't plan on buying a car or home in the next couple of years.

Last time I checked, my credit was in the 750 range, but that was before the 2 30-day lates.

Thanks for any input...

[anonymuse]

I can't say whether or not it's a good deal. However, if you work on a deal, put it as part of the agreement that they will take the negative marks (late payments) off of your credit history.

[Titan]

Here's the deal... I don't qualify for chapter 7.
I'm $30K+ in unsecured debt.

Family is sick of seeing me worried and stressed out over not being able to make minimum payments and have anything left over for family and are willing to help me out (thank God for loving family). I've never made it a habbit of taking help, but I don't see a way out this time. They have offered $20K to help get me back on my feet with the (proper) expectation that I will hussle and get the other 10 paid off and learn from my experience.

I've struggled to keep all the bills current, but have recently went 30-days behind on 2 different cards. I called to see if CC companies would accept any kind of reduced amount. I want to pay for what I used, but asked about knocking off the interest on a few.

I have one that is owed 10,500 and they siad they'd take $9,500 mark the debt as settled and close my account. I have a second account with them with a $4000 balance and they said they'd take $3,700.

My interest for just the past 6 months or so is more than this, but at least it's something. Should I do it? How will it alter my credit score that is currently 672? And how long would it stay down? I don't plan on buying a car or home in the next couple of years.

Last time I checked, my credit was in the 750 range, but that was before the 2 30-day lates.

Thanks for any input...

If you can afford a lump sum payment of $9500/10,500 and 3700/4000, you don't need to settle. Two things to remember about a settlement:

1. You will have a mark on your credit score that will be almost equivalent to a bankruptcy.
   
2. If you settle, the difference between what is owed and what you pay is considered income, and you become liable for taxes on it. You don't want to get on the bad side of the IRS.

Pay down the highest interest accounts with the $20,000 and knock down balances on the others. A settlement will have a negative effect on your credit. Also, just because you don't plan on buying a house or car in the near future doesn't mean that you will hold to it. Things and circumstances change.

[no_it_all]

How will it alter my credit score that is currently 672?

Last time I checked, my credit was in the 750 range, but that was before the 2 30-day lates.

Huh?? Sorry, but I am not sure what <exactly> you are asking....

[SinkingFast]

If you can afford a lump sum payment of $9500/10,500 and 3700/4000, you don't need to settle. Two things to remember about a settlement:

1. You will have a mark on your credit score that will be almost equivalent to a bankruptcy.
   
2. If you settle, the difference between what is owed and what you pay is considered income, and you become liable for taxes on it. You don't want to get on the bad side of the IRS.

Pay down the highest interest accounts with the $20,000 and knock down balances on the others. A settlement will have a negative effect on your credit. Also, just because you don't plan on buying a house or car in the near future doesn't mean that you will hold to it. Things and circumstances change.

In addition to this advise, I'd add,...........

If you want accounts closed, then write letters closing them yourself. That shows on your Credit Reports as well. Who closed the acct. And it's much better if it says, "Paid in full. Closed by Customer." than "Closed by Credit Grantor."

Figure out which ones you want to keep open and which you want to close. Then pay off what you can, in full, and apply the rest of the $20K to other accts. Then work from there to finish paying off the rest.

While it's easy for us to recommend you pay off the higher interest rate CC's first, you are struggling financially every month right now. Maybe look at what you'd have to pay in $$$ and cents/month and go with what gets you the smallest total CC payment amount to help with your overall budget.

But definitely, pay them off, in full, on your own. Your long term Credit will be less adversely affected if you do.