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I am trying to repair my credit myself and was told that if I negotiate with my creditors to settle for a lower payoff that it would make my credit worse? My debts are 2-3 years old, so what happens to my credit if I pay them or if I file bankruptcy?

5 Thoughts on Does it hurt your credit to negotiate collection accounts?
  1. Reply
    July 25, 2011 at 6:26 am

    Paying a bill is never bad for your credit. If you do negotiate your own debt make sure you get settlement agreements in writing. Debts get sold off so many times these days you need documentation.

    As for your credit. The settled debt will show as “settled” or “settled for >owed”. either way if someone is looking at your credit they see it was handled. This is good if your buying a house. Lenders don’t want to issue loans if they see a threat of a civil suit that could result in a lien on their collateral.

  2. Reply
    ace j
    July 25, 2011 at 6:27 am

    If you file for bankruptcy then your credit is shot for good.

    Negotiating with debtors can stop bad credit ratings if they are prepared to play ball.

    Bankruptcy is a last resort but if you can’t negotiate they may force you in to an involuntary bankruptcy.

    Read this and then try to negotiate your payments:

  3. Reply
    Banbalan B
    July 25, 2011 at 7:22 am

    STOP!!! Dont do it, unless they are suing you or the collectors are driving you to the brink of self extincion.

    The damage to your credit report is already done. There is nothing you can do to “repair” it. Sure, it could look a tiny bit better to pay your accounts, but just a tiny, ant size, better.

    It is true that if you are buying a house you will need to take care of these debts, but who will mortgage you in this tight market (June 2008)?

    Hold on, stand fast, bite the bullet. The negative information WILL stay on your report for 7 years (from the day of posting, or the day the account was thrown a loss). After that period, negative information will be cleared.

    You will be “reborn” creditwise, and you will also have saved some cash.

    Unless they sue you, don’t pay now. It will not improve your credit a bit.

  4. Reply
    July 25, 2011 at 8:17 am

    It will hurt your credit record far less if you renegotiate your terms (and repay the debt), than if you file for bankruptcy.

    Bankruptcy really is a last resort to living life on the street, because good luck to you ever getting affordable credit and/or insurance again if you have it on your record.

    It’s like painting a big red sign on your forehead that you can’t manage your finances, and therefore only subprime lenders will ever look at you in the future.

    Given the recent credit crisis however, even they might turn you away…

  5. Reply
    July 25, 2011 at 9:01 am

    Despite what the collection attorney told you, you did hear correct that paying off old debts can often lower your score, because it makes the item appear more recent.

    What you need to do is negotiate a pay for delete agreement, so the negative mark is completely removed from your credit. That is the ONLY way paying off old debts will help your credit score.

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