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In the past three years i had a couple credit cards that i defaulted on, they proceeded to the collections process, but know i am ready to pay them off. Which would help my credit the most paying the companies directly (Capital One, Wells Fargo Visa) or is it ok to cut a deal with the people that call me all day from weird named collection agencies that now own the debt.

5 Thoughts on Im ready to payoff credit card debt, do i pay the company i owe or the collection agency that calls me?
  1. Reply
    John K
    November 25, 2011 at 12:17 pm

    It depends on whether or not the cc company has already written your account off yet. If the credit card in question has already been “Charged Off” on your credit bureau, then you need to pay the collection companies. Check with the original ccard companies before paying anything. Hope this helps.

  2. Reply
    November 25, 2011 at 12:40 pm

    If the credit card companies actually sold the debt, rather than just assigning it to a collection agency, they won’t accept payment from you. (If they did just assign it and still own it, you should definitely pay them, NOT a collection agency.)

    In fact, I will take this a step further and say that you should never pay a collection agency under any circumstances, without requesting “validation” of the debt first.

    Here is a sample validation request letter that you should always send before paying a collection agency:

    IF they comply with the requests in that letter, and that’s a big if, because many times they don’t, you should then negotiate what is called a “pay for delete” agreement, which is outlined here:

    PS–Please do not speak to any collection agencies on the phone under any circumstances! All communication with them needs to be in writing.

  3. Reply
    November 25, 2011 at 1:36 pm

    First, 3 year old defaulted credit card accounts were charged off and sold to collection agencies long ago. Probably been thru more than one collection agency. You have to deal with the one calling you now.

    The collection agency should have sent you a notice within 5 days of first contacting you. This validation notice includes the name of the original creditor, amount, dates, and some dispute info. If you haven’t received such a notice, you want to send a certified, return receipt letter to the collection agency requesting validation of the debt to include copies of contract or other documentation that proves the debt is yours.

    Paying derogatory accounts won’t improve your score. The damage is done and will stay the balance of the 7 year reporting period. However, creditors look at your whole credit report, not just the score. Paid old debt looks better than unpaid.

    With this in mind, you may as well negotiate settlement for as little as you can. You should be able to settle 3 year old debt for 25%. Lump sum gets the best deals. Payment plans have to be very short term. Get any settlement agreement in writing before you pay anything. Do not give the collector direct access to your bank account.

  4. Reply
    November 25, 2011 at 2:25 pm

    Paying back old, charged-off credit card debt is a tricky matter and it might not be in your best interest to pay it back, as doing so may stir up more trouble than it’s worth. Here’s why:

    – When a credit card is charged-off as bad debt, you need to understand that the damage to your credit is already done and there is no undoing it. 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. This does not mean that you will have bad credit for the entire 7 years though.

    – There are two reasons that you may want to consider paying back a charged-off account:
    1) You are applying for a new mortgage, loan or apartment and the creditor is insisting that all defaulted items be paid off
    2) There is a confirmed lawsuit pending on the debt

    If you’re going to pay off old-charged-off debt anyway, then you might as well negotiate the lowest, rock bottom settlement you can possibly get, being that the negative charge-off notation is going to stay for 7 years on your credit report, regardless of whether the charge-off is paid or unpaid. …Offer 25%

    DO NOT admit in writing to owing the debt…if you do you might trigger a lawsuit against yourself. 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 this issue will be settled. Upon receipt of this agreement, I will mail you a money order for this amount.
    – Settled/Forgiven debt is treated like earned income with the IRS…any debt that is forgiven must be added to your next year’s income and you’ll have to pay whatever additional taxes

  5. Reply
    November 25, 2011 at 3:10 pm

    First do not accept any phone call from any debt collector cause that will assume that you acknowledge you owe the debt. Get everything in writing, EVERYTHING!!!. Have whatever company that is trying to contact you mail to you what you are responsible for, this can only be done by waiting for them to contact you by mail. Then reply to them, very vaugely, that you will will settle this matter for a certain %, you must give a % if you dont they will make one up what that is in their best interest and not yours. Tell them you are going through financial hardship, recent job loss, limited income and offer 60% settlement. They will laugh but maybe meet you halfway at 30%. Remember they lied to us so we can lie to them. Before anything make sure they tell you how it will show on your credit report as “Settled” or “Charge off” get EVERYTHING in writitng NOTHING by phone

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