Well like the title says, when I was about 18 I had been working for a few years and started to build up a good credit (car loan 3-4 credit cards, etc.) however I had a child and lost my job around the same time and began to fall in to debt. Now I am 23, married, 2 children, and I would like to repair my credit that I have ignored over the past couple of years. I have about $6000 right now that could go towards paying off old debts. I have probably close to 7-8000 in debt but I am not going to actually pay that much because it is mostly interest, etc. I%26#039;d like to pay at least 1/2 or less. Anyway question is what are the first steps I should take in doing this. I%26#039;ve already got my credit report and have all the information for contacting the creditors, however after speaking with one of them I realized I should not have done that and should research more. Is there anything I should know that will give me bargaining power when talking to the creditors?
I have $6000 to pay off old debts...should I?
How to get a creditor to make the deal you want
You have the natural advantage in debt settlement, because you have something the creditor wants. Don%26#039;t cave in when they first tell you no. Maintain calm. Don%26#039;t lose it and get angry. It%26#039;s usually best to correspond with them via letters, so you have a paper trail of all your actions. Keep the attitude at all times that the collection agency will take less money then they say they will.
How much to offer
To give you some background, most bad debt companies pay or receive literally pennies on the dollar for the debts on which they are trying to collect. The amount that companies pay for bad debt depends on the type of account and its age:
* Debts that have recently been charged off: 6 to 7 cents on the dollar.
* Accounts that are slightly older and on which a collection agency or two has already taken a whack: 1.5 cents to 2 cents on the dollar.
* Years-old, out-of-statute debts: A penny or less.
* Source: Sean McVity, portfolio broker at Keefe, Bruyette %26amp; Woods.
With this in mind, you should always start your offer at 25% or less. Let%26#039;s understand the math here. If your debt is $1000, let%26#039;s say at the most, the collection agencies has paid or will collect 7 cents on the dollar, or $70. If you offer them $250 (25%), they are still making a profit of $180. Remember, the credit card companies are out of the picture at this point. This money goes directly to the collection agencies.
Other things to remember in negotiation:
1. NEVER talk to a collection agency on the phone. Period.
2. Get your terms in writing before you even open your checkbook. Here is a sample of an agreement requesting the reduction of your debt amount. Never expect a creditor to meet an agreement that was made verbally. Everything must be in writing and, even then, you will probably have to fight to make the creditor live up to his end of the bargain.
3. Keep good records. This can be the difference between a good and bad settlement. Don%26#039;t expect them to remember you or what you agreed upon.
4. Send all correspondence via registered mail, receipt requested(about $3-$4 a letter).
5. Keep a copy of every letter you send.
6. If you call (and why are you calling?), keep a log of when you spoke to the agencies, and who you spoke with. Ask for the name of the supervisor of the person you spoke to, as the turnover rate at collections agencies is high.
7. Follow up all phone correspondence (again, why are you calling?) with a letter (registered, of course).
8. Penalties and extra interest are typically fictious amounts of money added on by the collection agency to pad their profits. I%26#039;ve seen as much as to 50% of the debt or more claimed to be owed by a collection agency consisting of interest and fees. Example: Recently, I talked to a guy who had his $5000 original debts balloon up to $11,000 in less than 3 years. This is illegal, every state has usery laws (which dictate the maximum interests allowed to be charged.) If you consider the junk debt buyer paid 7 cents on the dollar or less, there is no way there is this much interest. Most companies would be thrilled to get you to pay the original debt even without the extra penalties they add on and will usually be more than agreeable in waiving these fees.
9. Time is on your side. As time passes, the creditors will likely stop calling and the debt will be filed away for future attention. The longer the debt remains uncollected, the better your chances will be of getting a good settlement. Eventually, the creditor will consider the bad debt a loss in order to receive a corporate tax write-off. This does not necessarily mean that they won%26#039;t pursue you for the debt. The corporation may then collect on the debt themselves, sell or assign the debt to a collection agency, press for a judgment and garnishment, or temporarily ignore the debt. The course of action chosen by the creditor will vary widely between corporations and debts.
10. Never look too eager to settle. Take plenty of time to reach an agreement. Never let it slip that you need to settle the debt because you%26#039;re buying a home, car or anything else. If, for example, you tell a creditor that you really need to get this debt settled to get into your dream home, you can forget any kind of settlement. The creditor will insist on the full balance. Don%26#039;t accept the first, or even second, settlement offer. Make sure that they are the ones calling you to push the deal forward. You cannot expect to reach an affordable settlement if the creditor thinks he has the upper hand.
I have $6000 to pay off old debts...should I?
Debt is only a bothersome thing if you let it be. If it is giving you sleepless nights, pay it off. If you don%26#039;t give a crap, then use your money for something else.
I have $6000 to pay off old debts...should I?
Well, the best thing to do is get it over with. If I were you, I would not want my debt to pile up too big...
I have $6000 to pay off old debts...should I?
They are not going to remove it from you credit report it will just show the account as a charge off most likely.
I have $6000 to pay off old debts...should I?
If you are late it will be gone in seven years. Yes after seven years it goes away. Is it worth 6K for 2 years?
Oh and it will not be removed just changed to chrage off paid. Still bad.
I have $6000 to pay off old debts...should I?
Use a credit repair place.... NOT just any... Look at some of the homebuilders you want to consider... They have mortgage contacts that can get you to legitimate credit repair folks.
I have $6000 to pay off old debts...should I?
The sooner you pay off your debt, the better. There%26#039;s no point in accumulating debt because it will just hurt your credit score more and more. If you pay it off as soon as possible, you might be able to improve your credit score down the road if you make payments on time, and you will get better interest rates in the future.
I have $6000 to pay off old debts...should I?
your first step should be getting some education on what credit is. you have probably severely damaged your credit history, and paying it down now won%26#039;t automatically fix your past history. your score will climb over time, but it takes several months for improvement to appear. And why wouldn%26#039;t you pay that much ($7-8000)? Interest is what makes debts skyrocket? You really need to understand how credit works.
I have $6000 to pay off old debts...should I?
you should pay off one credit at a time. They will not erase it from your history but they will stop putting bad things in your history once they are paid.
You dug your own grave with this but there is no reason to lecture you on it, nothing will be taken off your record is the main point.
Pay them off one at a time, if you can with one payment, this will help stop interest from cropping up from multiple sources...making it easier to get out of debt once and for all.
I have $6000 to pay off old debts...should I?
If you don%26#039;t pay them off in full, they can still leave it on your credit report. So, it really comes down to bargaining power. Never the less, even if they agree to not put it on your credit report if you pay all but the interest, what are you going to do if they DO put it on your credit report?
If you are trying to create good credit by negotiating off bad debt, it%26#039;s not going to work. You create good credit by being a low credit risk and displaying Good Faith in resolving a debt. Partially paying it off as a settlement isn%26#039;t defined as Good Faith.
Never the less, see if you can negotiate with a manager at your creditor%26#039;s place and see if you can get the deal in writing. That might give you recourse to remove the black mark if they agree not to report it.
I have $6000 to pay off old debts...should I?
my answer is you are better to pay off your debt because by next year it would be higher,because of the intrest rates last year i came into 14,000 my debt was like 10,000 i wasted the money on material things now i am in deeper debt ,pay it off because if you dont you will regret down the line.
I have $6000 to pay off old debts...should I?
it is a tough ?. there is so many things that are involved. I pull many credit reports for my clients. if you have 100,000 in credit and only 8,000 is being used, you are looking good. Take a look at the percent of credit you have a available. If you have 80% avail, you are in a great situation, if it shows you have 0-10% avail, you better start paying some bills. lol. there is also a lot more involved, but i can write a book. Also if you have leans on your report, forget about it, unless its like an $80 cellphone bill.
Buy your wife and kids something nice and invest the rest in a Roth IRA.
I have $6000 to pay off old debts...should I?
There are some great people out there who work wonders with dealing with creditors. The best thing you can do is hire a third party to negotiate for you, someone who knows the business really well. If you want a phone number for a guy let me know, I have a great guy and he works wonders with my taxes too!
I have $6000 to pay off old debts...should I?
I would try to negotiate for .50 cents on the dollar....
contact one at a time, don%26#039;t stir up all the bees nests at once so to speak. tell them you have a little money and would like to settle the debt....
any deals are to be in writing and signed before you send money.... or will will find out that you had no deal! Collectors and credit card companies lie all the time.
do not give the access to your checking accounts... or they will wipe it clean by taking out more than you have
do a search at daveramsey.com for more info...
I have $6000 to pay off old debts...should I?
Many companies will settle with you for as little as 10 percent. %26quot;Settlement%26quot; is the technical term. Whether you settle at 99% or at 10%, it will still show as %26quot;Settled%26quot; on your credit report.
Although the companies cannot legally remove it from your credit report (it wouldn%26#039;t be fair credit reporting), it will at least start the process of improving your credit. If you do nothing, it will keep moving from collection agency to collection agency and become more of a nightmare to clean up as time goes on.
To negotiate best, you have to give them little hope of winning in a judgement case and garnishing your wages. That means not having a job, being on the brink of bankruptcy, and having little hope. Tell them you have a little money coming in and you can offer 10 percent of the total debt. Let them sweat a couple of months, but they will be happy you are at least making contact and some sort of attempt.
In time, your credit score will begin to rise rapidly and in 7 years- assuming you don%26#039;t fall into default again, your score will be clean! Good credit will save you thousands in the long run, so clean this up as quickly as possible and be sure not to default on anything again!
I have $6000 to pay off old debts...should I?
Credit cards: Depending if you are in default with those creditors or if that debt has gone to collections...
Usually if the credit has gone to collections, they will settle for less then what you owe. Call them up and say I am looking to settle my debt and I was wondering if there are any settlement offers in place at this time.
If you have been paying the minimum amounts and are still with the original creditor, you will end up paying all of what you owe. This is b/c the defaulters are more of a risk and the collection agency that has bought the account from a credit card co. would rather see something come in instead of losing the money they paid to buy your account.
I have $6000 to pay off old debts...should I?
You borrowed the money, you need to pay it back. It is your moral obligation. If I borrowed money from you, you sure would expect it back
Start small by paying minimums and work up to havinga goal to pa it off in 2 years. (maybe get a 2nd or 3 rd job)
Good Luck
I have $6000 to pay off old debts...should I?
I would not pay credit card debt is unsucured debt
What can they do NOTHING!!!!!!
Check your credit report see when the last activty on the debt if you dont pay it it fall off anyway
it called stature of llimations ( google)
usually 4-7 years depend son which state you live in you dont pay it will fall off anyway
dont pay collection agencys never pay any thing until you get it in wrighting if you pay on a debt it starts the stature of limitions over again (you dont want that)
Instead use the 6000 for a emergency fund in high interest account online banklor cd o rmoney market account
you could get secured card with orchard bank to put 500 in account and build credit for 12 month a lif you pay on time you get a unsecured card that wiil raise your score right away
I have $6000 to pay off old debts...should I?
THE RIGHT ANSWER..
I want you to contact a Mortage Lender and pre-quality for a home.mortage loan.. They will tell you how much to pay for the real estate . Then they will help/advise you how to clean up the credit report. This advise and information is all free. You start the part time business after you move into your home It will also help that your wife obtain employment if she is not working... The goal is to purchase your own home -- right. Then go to a mortage lender... The $6000 might be able for a down payment --to avoid paying the credit insurance.. Put 20% down to avoid a monthly premum credit insurance --
I have $6000 to pay off old debts...should I?
Many collector agencies will work with you and will remove the incident from your credit within a month or so of you paying it off. Sometimes they won%26#039;t though. Your biggest bargaining chip is that you have the money to pay and you will pay your debt if they negotiate the right way.
The bad part is that if you don%26#039;t pay, it will show up as not being paid instead of just paying late which will look worse. Bad things are only supposed to stay on your record for a number of years, but if you don%26#039;t pay, many times right before it%26#039;s supposed to come off, the agency will sell your collection to another company which will mean another few years to wait. The process continues so that it%26#039;s always on your report.
To better your credit, take out a small loan (or the most you can get) but don%26#039;t spend the money. Put it in a savings account that you never touch so that the money builds interest and you will spend less money on interest rates charged by the loan. Each month make the monthly payments for six months. On the seventh month pay the loan off. For a $10,000 loan, you might only pay $100 or something on interest and it will look great on your report. Keep doing this and those bad spots won%26#039;t look as bad when compared to the number of loans you%26#039;ve completed.
It takes 6 months for a loan to show up on your report so every six months you will have a completed loan paid on time. Also, each time you pay a loan off, you will qualify for a larger loan.
I have $6000 to pay off old debts...should I?
First of all these debts are 5-yeas old and will fall off your credit report in another 2 years anyway.
If you really want to pay some of them off, you must get a pay for delete agreement in writing first or your right it%26#039;s a waste of money.
If you pay any of them without this agreement your score will actually go down since the accounts will become current rather then old. If they refuse to give you this agreement don%26#039;t pay them anything.
90% of your credit score is made up of the last 24-months of activity so these accounts are really not hurting your score that much.
Do everything in writing no phone calls. And like one of the other posters said, never give out your bank information.
And just so you will know as old as these accounts are you are past the statute of limitations so they can%26#039;t sue you anymore, at least if they do all you have to do is show the court that the S.O.L. has expired and the case will be dismissed.
I have $6000 to pay off old debts...should I?
you only have 2 years left of the 7 years? it goes off your credit report in 7 years and drops off completely. any financial transaction (like a payment or promise to pay) will start the 7 year clock ticking again.
morrally if you feel you should pay, then do as the above say, blow all your emergency fund after getting %26quot;removal from credit report%26quot; letters from original lender and collection agency. communicate with collection agencies only in writing, lenders you can talk to but writing is encouraged. try to fire any outside collection agency with a termination letter so you can negotiate with the lender directly....10-.35 cents on the dollar should do it after 4 years. all agencies on each debt have to agree and give you the letter. remember paying will start the credit report 7 year clock ticking again.
otherwise you keep the 6k, the negative stuff drops off in two years and all you have to do is wait it out. a lot of people out there think that by paing after a few years that it will be a positive but its not, its computers and policies and an ugly credit report and no-one cares except you and people who won%26#039;t lend to you wether you pay or not...a computer doesn%26#039;t care.
you would think the credit reporting business and the lenders would be interested in benefitting those who pay their debts no matter how long it takes them but they don%26#039;t. The credit report people are in the business of providing negative information otherwise they are no good to the lenders. The lenders have policies and computer programs to say yes or no and paying or not paying does not influence their hatred of you either way, they don%26#039;t care. They just do the math it%26#039;s a numbers game and a tax write-off to them...they even sell off their bad debt to collection agencies who then sell again who then sell again on and on and on.........
no recommendation here...do what you believe is the right thing.
I have $6000 to pay off old debts...should I?
You%26#039;ll need strong credit to start your own business, and the best way to get good credit is to pay down the debt. It won%26#039;t come off your credit report for several years, but your credit report will tell potential lenders that you%26#039;ve paid it off. So even if the items are still on there, you can explain to future lenders that you made a mistake, learned from it, and are much more responsible now.
$8k is alot, and you should pay all of it, but you might be able to reduce it by offering to settle with the collection agencies you owe money to.
Most agencies will settle for 80% or so if you are able to make one lump payment (which you can, so that works big time in your favor). They won%26#039;t always offer it, but you can bring it up and see if they%26#039;re willing. They just want to get your account out of their office, so sometimes they%26#039;ll knock down the balance.
I have $6000 to pay off old debts...should I?
yea ur debt is just gonna get higher id pay off wut u have of ur money to debt and maybe invest in 1000
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