Should I negotiate my debt?

May 19, 2009 12:57 PM

Should I pay my full debt to a collection agency, or bargain the debt down?

I owe about $500 to a collection agency and I know they bought that debt for much less than that, and would be willing to bargain.

My main interest is in repairing my credit rating. If I bargain for less than $500, will in inhibit the restoration of my credit?

posted by Pinwheel to work & money (5 answers total)

Make sure you include removing black marks off your credit in the bargin.
posted by jeffamaphone at 1:15 PM on May 19, 2009

If you settle for an amount less than the amount owed, the collection agency may report it to the credit bureau as having been settled for less than the full amount. I know that this is a red flag to certain companies and lenders.
posted by reenum at 1:38 PM on May 19, 2009

Forgiven debt is taxable income in many cases. It might also damage your credit as reenum pointed out.

For such a small amount, I'd pay the whole thing, but get in writing that they will remove the black marks before you hand over a check.
posted by peanut_mcgillicuty at 1:47 PM on May 19, 2009

If a collection agency is already reporting on you, your credit rating has already taken a hit. Bargaining the amount down shouldn't make much difference one way or the other, as long as the outstanding balance is being reported as zero.
posted by gimonca at 6:34 PM on May 19, 2009

Your credit is already tarnished. Settling the debt -- offer 10 to 20%, expect to pay 50% or so -- is common. To repair your credit rating simply takes time and racking up the on-time payments. Don't get too paranoid about your FICO.

Bankrate: How to settle with a debt collector.
posted by dhartung at 10:34 PM on May 19, 2009