Is it worth it to pay off my CREDIT CARD DEBT?
Jon Dough asked:
My score is around 500 for all three credit bureaus. But most of the accounts will be removed from my credit report by 2013. I checked with this DMP to help me and the amount was about $150 per month, for 3 1/2 years. If you do the math, I’ll be debt free around 2013. Obviously, I want my score to go up, but I’m not in a hurry. So should I pay, or just wait it out ’til it falls off? Serious (hopefully professional or experienced) answers only. Thank you.
… Thanks for the answers. I am already behind on my payments (some as much as a year). The collection agencies call me about twice a week, hopefully that helps.
Vanessa
My score is around 500 for all three credit bureaus. But most of the accounts will be removed from my credit report by 2013. I checked with this DMP to help me and the amount was about $150 per month, for 3 1/2 years. If you do the math, I’ll be debt free around 2013. Obviously, I want my score to go up, but I’m not in a hurry. So should I pay, or just wait it out ’til it falls off? Serious (hopefully professional or experienced) answers only. Thank you.
… Thanks for the answers. I am already behind on my payments (some as much as a year). The collection agencies call me about twice a week, hopefully that helps.
Vanessa
Herman
Its always worth it.
Gladys
People usually enter debt management plans BEFORE the cards are charged-off, not after the cards have defaulted and sold to debt collectors. It’s pointless entering into a DMP if you have already defaulted on the cards and debt collectors have your accounts. Most collection agencies don’t want to deal with DMP’s for defaulted accounts.
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. Offer 25%. 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 is issue will be settled. Upon receipt of this agreement, I will mail you a money order for this amount.
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Harvey
Honestly if they have not come after you by now, I would wait and just let them drop off.
If they do come after you get them to give you a pay for delete agreement if you can that way after you pay them the accounts will be removed from your reports.
Besides is you pay them a dime it resets the statute of limitations.
Eva
You should pay. Making payments will raise your score. Creditors don’t just look at your score, they also look at your currency on your pyments etc.. So if I were you I’d see if you can make a deal, call each credit card and ask if you were to settle right now, how much would it be to pay it off. Usually when you do this they will settle with you and say if you owe 800, then they may settle for 500 pay off. if they go into collections, then you have like 7 yrs at that point before they are dropped off and a lot of them don’t drop off. Statutes of limitations are diff from state to state and debt to debt.
Anita
It really depend on the Statute of Limitations (SOL), the time frame to bring lawsuit. Check here for your state: . It varies from state to state but typically starts from the date of last activity or last payment.
If the debts are still within the SOL, it might be worthwhile to negotiate a settlement. A lot of collection agencies are going to small claims for relatively small amounts.
General rule of thumb: if the debt is over 3 years old, offer 25%; 2 or 3 years old, offer 50%; less than 2, offer 75%. Lump sum gets the best deals. Payment plans have to be short term. Get any settlement agreement in writing and keep it forever, along with your payment proof. Do not give collectors direct access to your bank account.
Gary
I’d go with what Maalru3 said. He got thumbed to death by the majority but if you look at the state of the economy, the same majority are so deep in debt they are poorer than the illegal immigrant they despise so much.
So, go with what the minority says.