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» The Ornery American Forum » General Comments » I need some quick advice on credit scores

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Author Topic: I need some quick advice on credit scores
JoshuaD
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So I had a small amount of tuition that I owed my school and ignored for a few years. It was sent to a collections agency, and I'm paying it off.

I owe 1875. I talked to the collections agency and asked them if they'd take 1750, they said they will if I pay in full immediately, but the guy advised me that it might not be a good idea.

He said that it will be reported to the credit gods as a settlement rather than as a full payment, and that will adversely affect my "beacon score" and "CVR Points".

I have the extra $125. My credit's pretty bad right now, but it's mainly due to this debt. Once I pay this off, I won't have any other bad debt out there. My plan is to recover my credit in the next 5-7 years, at which point I imagine I'll need it. For now, I don't need it at all, and I don't expect I will for some time.

So should I pay them the extra $125? It's not a huge sum of money to me, but it's not nothing either.

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Stevarooni
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If you're planning for recovery over 5-7 years, I think that the difference between a settlement and a paid-in-full after going to collections is going to be pretty minor. Either way, you'll have a "sent to collections" notation on your bill (which, from what I've read on various and sundry sources on the Internets™, doesn't even matter if you've paid it or not) it would disappear after 7 years.
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The Drake
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A settlement will be a drag on the score, but minor. What would you be getting for your extra $125? Not enough to matter if money is tight. The guy from the collections did the right thing by warning you that there is a difference, however, I'd probably take it.

They might have room to negotiate down further, as well, IMO. They are only taking less than 10% off in return for immediate cash. Collections agencies get far more than that when they buy the debt from the school.

It may be too late if they now know you have 1750.

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Quinnalus
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The Drake is correct... these guys buy the debt for 25 cents on the dollar... the original debtor rights the balance off on taxes... and regardless of what you do you will have a collection notation... at this point it doesn't matter if you settle for 50% of the original balance or 90%... the notation will be the same...

"SETTLED FOR LESS THAN THE ORIGINAL BALANCE"

...which only loweres your score about 3-5 points and then you will get a 1099 for the portion that they wrote off...

IMO call them back and offer $800.00, settle at 50% which is about $935.00 and be done worrying about it.

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IrishTD
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Since you've owed it for a few years, then Quinnalus is probably right that they bought it for a few cents on the dollar. Negotiate it down.

And whatever you do GET THE DEAL IN WRITING. And do not give them any account numbers. Pay in cash/money order/etc. I repeat, do not give them any account number (personal check, debit/credit card #, etc.)

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G2
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You have the money, pay what you owe. This money will be nothing in a few months/years. In the long run, knowing that you've paid your debts and the peace of mind and dignity that brings is more than worth a measly $125.

Follow IrishTD's advice, do not give them any account numbers. Collections agencies are where used car salesmen that are too slimy for used car dealerships work, they are scum. You give them an account number and they will use it. Do *not* give them any account numbers.

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JoshuaD
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How do you pay them without giving them your bank account number? Even if I send them a check, it's written there across the bottom.
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Redskullvw
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money order
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scifibum
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quote:
You have the money, pay what you owe. This money will be nothing in a few months/years. In the long run, knowing that you've paid your debts and the peace of mind and dignity that brings is more than worth a measly $125.
I don't think there's much peace of mind to be had in giving the collection agency full payment. Pay them what you have to to make it go away (they'll be happy with their profit) then if you want peace of mind make a donation to the school.
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Redskullvw
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1. Go to the school.
2. Inform them you owe them a financial debt.
3. If they say they don't "own" the debt, insist on paying it in full.
4. Pay what you really owe to the party you actually owe it to, and get it in writing.
5. Get paper documentation.
6. White-out any personal identification numbers or account numbers and make several photocopies.
7. In writing by certified letter, send a letter of statement to the collection agency that you do not owe them anything. That you have already independent of any act or agency on their part paid the school off. Send them an enclosure copy of the written proof of payment. Send a copy of your letter/enclosure to all three credit rating agencies by certified mail as well ( but in the case of the credit reporting agencies do not white-out your account info)
8. Wait until you confirm the delivery by certified mail. After this point, having written them to drop dead because it isn't a valid debt, you can literally sue them for harassment if they continue calling or contacting you. If you talk to them by phone, inform them by voice that you will be recording their conversation so that you have evidence to prove they are persisting in contacting you.
9. If you don't get contacted after a few weeks and/or if the collection agency keeps picking on you, do the following. Dispute the reporting by that collections agency. The credit reporting agencies will already have the certified mailing copy you sent previously. The dispute should result in their complete removal of the collection account.

As to having bad credit scores not hurting you, think agin. Your insurance rates on your house, auto, life & medical coverages are all directly linked to your fico. A bad FICO can screw you. Trust me I know from personal experience. Also the longer your FICO is bad the more expensive it will be to initiate or obtain lines of credit at reasonable rates.

Long and short...

Like G2 said you owe the school the money. You don't owe the collections agency anything. But settling with the collection agency for pennies on the dollar still screws the school.

So do the right thing. Pay it off in full to the person or company you owe it to. And when you do use a money order and keep the receipt.

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