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  1. #1
    wantingtohelp is offline Junior Member
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    Credit report impact of a reduced payoff

    Ohio. Can anyone explain the ramifications with your credit files on paying off an unsecured debt at a reduced amount vs a full payoff? What are the right words to ask for?
  2. #2
    Ladynred is offline Senior Member
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    First of all, an entry of 'settled for less than full amount' on your credit reports is a BAD MARK. Paying off an old debt will NOT help your credit scores.

    If you're dealing with a collection agency you want to negotiate a 'pay for delete' - you'll pay if they will delete their scuff marks on your credit. At the very LEAST you want it reported as 'paid' with no mention of it being a settlement.
  3. #3
    wantingtohelp is offline Junior Member
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    Thanks Ladynred!!
    If I understand right, to maximize your credit score, the only time you should use a reduced payoff is if the creditor will agree to report it as "paid". I also thought I read on this forum that a collector usually can't make this agreement and that you must go back to the original creditor for this agreement. Is this true? Is there a better report than "paid"?
  4. #4
    Ladynred is offline Senior Member
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    That is correct, the collector cannot change the tradeline of the original creditor. However you can sometimes get them to delete the collection entry with the 'pay for delete' I mentioned.

    "Paid" is good, "paid as agreed' maybe a tad better, but you may not get that, you didn't 'pay as agreed'.
  5. #5
    wantingtohelp is offline Junior Member
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    Thanks again Ladynred!!
    I'm helping my son out (with advice) after he stepped into it the last couple of years but we haven't done anything yet. He may receive an inheritance and I'm just trying to figure the best and quickest way to get his credit score back up. He has had no negative items the last six months but he is only making minimums on the some accounts and a couple were charged off as bad debts several years ago.
    I guess the best strategy is if we can get a creditor to take a reduced payment and post a "paid" or "paid as agreeded" (preferred) than go for it and cover the income tax for the difference. Otherwise it would be best for the credit report to pay it off in total but still try to have negative marks removed and post a "paid in full" if there is such an entry.

    Any thoughts??

    Also can you expand on your previous comment of "Paying off an old debt will NOT help your credit scores." That doesn't make sense to me unless it is beyond the SOL.
  6. #6
    Ladynred is offline Senior Member
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    Why doesn't it make sense ?? The ONLY thing that will make a difference when it comes to negative marks on your reports is TIME. As long as the collection, the charge-off, the lates, remain on your report, even if you pay it off, its STILL a negative tradeline and it will continue to tank your scores until it drops off at the 7-1/2 year mark. A paid charge-off, which is what it would be, really only matters to a lender, but to FICO it is STILL a NEGATIVE and is calculated as such.

    So, paying off really old debts doesn't do you ANY good score-wise.. its only good for you if you're looking to buy a house and the lender wants to see them paid.
  7. #7
    wantingtohelp is offline Junior Member
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    Now I understand.
    My objective is/was to:
    1) request a DV and if it is validated
    2) offer to pay some or all of the charge-off only if the lender agrees to a "paid as agreeded" (preferred) or "paid" and removal of the lates.

    If not, I agree - leave it alone.

    I realize this may be a long shot, but don't you agree it's worth trying?

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