Debt baaaaad
October 9, 2007 12:58 PM Subscribe
Consider a $3000 past due credit card account, about to be handed over to a collections agency. Is it better to settle for a lesser amount or fight the system?
Never mind how it happened, but I have a past due credit card account in the neighborhood of $3 grand. I asked what my options were, and they said I could either pay the past due amount and resume paying regularly, or I could settle for a 60% reduction.
I am a credit newb here, so what are my options and what would the consequences of them be?
Never mind how it happened, but I have a past due credit card account in the neighborhood of $3 grand. I asked what my options were, and they said I could either pay the past due amount and resume paying regularly, or I could settle for a 60% reduction.
I am a credit newb here, so what are my options and what would the consequences of them be?
If it isn't already handed over to the collections agency and you legitimately owe the money, why not just pay it back? I hate credit card companies as much as the next guy, but if you spent the money, seems like you should pay it back if you can.
posted by jtfowl0 at 1:11 PM on October 9, 2007 [1 favorite]
posted by jtfowl0 at 1:11 PM on October 9, 2007 [1 favorite]
A general rule of thumb is to avoid getting your debt turned over to a collection agency at all cost. They're experienced in making a profit while they make your life a living hell.
Believe it or not, your credit card doesn't want to go the way of a collection agency either, because they're expensive. Third parties can broker deals that individuals cannot.
If you do not have a banker to help you, you need to find some qualified help. Here in Ontario there is a government-backed non-profit that helps get you out of debt. I would strongly advise finding some kind of credit counselling. Check the blue pages where you live to see if there are any county/ state/ federal/ provincial agencies to turn to.
Remember: any private for profit credit agency knows what it's doing.
posted by gesamtkunstwerk at 1:14 PM on October 9, 2007
Believe it or not, your credit card doesn't want to go the way of a collection agency either, because they're expensive. Third parties can broker deals that individuals cannot.
If you do not have a banker to help you, you need to find some qualified help. Here in Ontario there is a government-backed non-profit that helps get you out of debt. I would strongly advise finding some kind of credit counselling. Check the blue pages where you live to see if there are any county/ state/ federal/ provincial agencies to turn to.
Remember: any private for profit credit agency knows what it's doing.
posted by gesamtkunstwerk at 1:14 PM on October 9, 2007
So uh, if I don't pay my credit cards for a while, will they offer me a 60% reduction, too???
Seriously, I'd take the free money.
posted by iguanapolitico at 1:27 PM on October 9, 2007
Seriously, I'd take the free money.
posted by iguanapolitico at 1:27 PM on October 9, 2007
Response by poster: Alright, I guess I need to be painfully explicit in phrasing the question I am asking or I end up with the standard AskMeFi "clever" responses. Christ, it's like the too- literal genies in bad fantasy stories in here.
Basically, the two options that I know about are:
1. Pay around $1k to bring the account up to date, and then start making normal monthly payments until the total debt is paid. The trouble with this option is that service fees and interest will add up to more than $100 per month, which I am uncomfortable paying. If it took ten months to reasonably pay the entire amount down, I would pay a total of $4000 rather than $3000.
2. Pay $1200 and have the entire amount written off. This would cost me a lot less, but I am under the impression that this would leave more of a blemish on my credit report than option 1 would. I am finding conflicting reports on what this will actually do to my credit, so I am not sure about this.
Here are the questions I am asking:
1. Are there any negative consequences of the above options that I have not thought of?
2. Are there any options of which I am unaware, with the end goal being getting rid of this debt with as little damage to my credit as possible?
3. Of the above two options and any others which may be mentioned in this thread, which would be your advised course of action?
posted by Willie0248 at 1:30 PM on October 9, 2007
Basically, the two options that I know about are:
1. Pay around $1k to bring the account up to date, and then start making normal monthly payments until the total debt is paid. The trouble with this option is that service fees and interest will add up to more than $100 per month, which I am uncomfortable paying. If it took ten months to reasonably pay the entire amount down, I would pay a total of $4000 rather than $3000.
2. Pay $1200 and have the entire amount written off. This would cost me a lot less, but I am under the impression that this would leave more of a blemish on my credit report than option 1 would. I am finding conflicting reports on what this will actually do to my credit, so I am not sure about this.
Here are the questions I am asking:
1. Are there any negative consequences of the above options that I have not thought of?
2. Are there any options of which I am unaware, with the end goal being getting rid of this debt with as little damage to my credit as possible?
3. Of the above two options and any others which may be mentioned in this thread, which would be your advised course of action?
posted by Willie0248 at 1:30 PM on October 9, 2007
Alright, I guess I need to be painfully explicit in phrasing the question I am asking
That helps if you want an accurate and useful answer.
Has the delinquent debt hit your credit report already and how bad? 30 days past due? 60? 90? It should detail to some degree. Evaluate if Option 2 and maybe see if the forums at creditboards.com can be of more detailed assistance to you.
posted by jerseygirl at 1:50 PM on October 9, 2007
That helps if you want an accurate and useful answer.
Has the delinquent debt hit your credit report already and how bad? 30 days past due? 60? 90? It should detail to some degree. Evaluate if Option 2 and maybe see if the forums at creditboards.com can be of more detailed assistance to you.
posted by jerseygirl at 1:50 PM on October 9, 2007
Response by poster: Thanks, jersey, I'm looking at the board you suggested right now.
posted by Willie0248 at 1:51 PM on October 9, 2007
posted by Willie0248 at 1:51 PM on October 9, 2007
How much is it worth to you to avoid seven years in the stinkiest credit doghouse? I would pay a lot more than $1200 for that. Seriously, is there any chance you'll want a car, a house, or a degree during the next seven years? Doing any of that on bad credit will cost you many multiples of $1200. Deciding not to go to school or buy a house because your credit's bad could cost you even more in lost opportunity. Pay your debt.
posted by gum at 2:01 PM on October 9, 2007
posted by gum at 2:01 PM on October 9, 2007
You've gone past due and incurred credit report troubles already. If a creditor gave me the option of paying back 60%, I'd take it and be grateful.
posted by theora55 at 2:06 PM on October 9, 2007
posted by theora55 at 2:06 PM on October 9, 2007
From where I sit $4000 worth of debt sounds like a dream. Pay it in full and learn your lesson. $400/month stinks but 10months will go by fast enough. In the long run you will thank yourself.
posted by ian1977 at 2:17 PM on October 9, 2007
posted by ian1977 at 2:17 PM on October 9, 2007
Yikes! Your nasty attitude towards people trying to understand your problem despite your vague initial question aside, what you're essentially asking is, "Is saving $1800 worth the hassles which will occur because of a terrible credit report?"
My answer would be no, it's not worth it. You don't really mention any details regarding your income and ability to pay or even where you are in life, but please consider the following:
1) It's your debt. You created it. You took a credit card with full knowledge (or full responsibility for acquiring the knowledge) of what the penalties. The honorable thing to do would be to pay it, as you originally pledged you would do should such a situation arise.
2) Compared to many people's debt, this is a very small one. $1000 will get you caught up, and then it will be possibly ten months (according to what you stated above) to pay it off. If it costs you a lot in interest, well . . . lesson learned. And that was always the deal. Again, it's a question of personal honor.
3) Seven years ago, I had a low-paying job and didn't own any property. Prospects seemed dim. Now I own two, plus a flat in Europe! I never would have expected to be in anything like in this sort of state at all today. One of the reasons I got here was I kept a pretty clean slate and tried to live right.
Seven years before that, I couldn't speak a word of English, was nearly starving (literally) and stuck in a warzone, having lost nearly everything and everyone I loved with little hope of any sort of future.
Seven years before that, I was in a great family and was a happy kid who felt secure and didn't have a care in the world.
Bad credit sticks with you at least seven years. It may seem like nothing now, but for me, every seven years has brought changes which were astonishingly great or catastrophic - but in nearly every case, wildly unanticipated.
You don't know where you might end up in seven years, but to sacrifice even the smallest of opportunities for the saking of saving a couple grand now seems utterly retarded to me. If you're the sort of person who'll fuck up constantly and won't ever change, I guess it won't matter. But if you want a bright and better future, suffer through the pains now and it'll be worth it.
posted by Dee Xtrovert at 2:17 PM on October 9, 2007 [5 favorites]
My answer would be no, it's not worth it. You don't really mention any details regarding your income and ability to pay or even where you are in life, but please consider the following:
1) It's your debt. You created it. You took a credit card with full knowledge (or full responsibility for acquiring the knowledge) of what the penalties. The honorable thing to do would be to pay it, as you originally pledged you would do should such a situation arise.
2) Compared to many people's debt, this is a very small one. $1000 will get you caught up, and then it will be possibly ten months (according to what you stated above) to pay it off. If it costs you a lot in interest, well . . . lesson learned. And that was always the deal. Again, it's a question of personal honor.
3) Seven years ago, I had a low-paying job and didn't own any property. Prospects seemed dim. Now I own two, plus a flat in Europe! I never would have expected to be in anything like in this sort of state at all today. One of the reasons I got here was I kept a pretty clean slate and tried to live right.
Seven years before that, I couldn't speak a word of English, was nearly starving (literally) and stuck in a warzone, having lost nearly everything and everyone I loved with little hope of any sort of future.
Seven years before that, I was in a great family and was a happy kid who felt secure and didn't have a care in the world.
Bad credit sticks with you at least seven years. It may seem like nothing now, but for me, every seven years has brought changes which were astonishingly great or catastrophic - but in nearly every case, wildly unanticipated.
You don't know where you might end up in seven years, but to sacrifice even the smallest of opportunities for the saking of saving a couple grand now seems utterly retarded to me. If you're the sort of person who'll fuck up constantly and won't ever change, I guess it won't matter. But if you want a bright and better future, suffer through the pains now and it'll be worth it.
posted by Dee Xtrovert at 2:17 PM on October 9, 2007 [5 favorites]
Best answer: I am not a credit counselor, but this is my understanding:
OK, so you are talking about different degrees of negative marks on your credit... first you have to remember what your credit report looks like... something like this:
Chase Visa Account 123-456-789
JFMAMJJASONDJFMAMJJASOND
XXX-----------XXXXXXXXXXXXXX
OK, these aren't lining up perfectly, but the letters represent the months Jan-December repeated twice. The Xs represent times you've made on-time payments. The -'s represent payments you have missed.
In the example above, it looks like you just stopped making any payments for about eight months, then got back on track and are making regular payments. This looks bad, but you haven't gone into collections and at least now you are back on track making regular payments and developing your credit history in a positive way.
Second scenario -- you take the settlement:
JFMAMJJASONDJFMAMJJASOND
XXX-----------S
This still shows you didn't pay for a while, and finally you settled the account for a lesser amount (the "S") (and I am making up these symbols, by the way).
You will still have the black mark from your months of not making payments, and you have a second sort of 50% black mark for settling for a lesser amount. But at least you paid it. Regarding your credit rating, scenario two is worse than scenario one -- you didn't pay off all of your debt and you are also no longer building a positive credit history.
Of the two scenarios, I agree with other posters, if you can do it, scenario one is better for your long term credit history. Either way, it is now blemished for at least seven years until those months of missed payments fall of the time limit.
posted by jerryg99 at 2:30 PM on October 9, 2007
OK, so you are talking about different degrees of negative marks on your credit... first you have to remember what your credit report looks like... something like this:
Chase Visa Account 123-456-789
JFMAMJJASONDJFMAMJJASOND
XXX-----------XXXXXXXXXXXXXX
OK, these aren't lining up perfectly, but the letters represent the months Jan-December repeated twice. The Xs represent times you've made on-time payments. The -'s represent payments you have missed.
In the example above, it looks like you just stopped making any payments for about eight months, then got back on track and are making regular payments. This looks bad, but you haven't gone into collections and at least now you are back on track making regular payments and developing your credit history in a positive way.
Second scenario -- you take the settlement:
JFMAMJJASONDJFMAMJJASOND
XXX-----------S
This still shows you didn't pay for a while, and finally you settled the account for a lesser amount (the "S") (and I am making up these symbols, by the way).
You will still have the black mark from your months of not making payments, and you have a second sort of 50% black mark for settling for a lesser amount. But at least you paid it. Regarding your credit rating, scenario two is worse than scenario one -- you didn't pay off all of your debt and you are also no longer building a positive credit history.
Of the two scenarios, I agree with other posters, if you can do it, scenario one is better for your long term credit history. Either way, it is now blemished for at least seven years until those months of missed payments fall of the time limit.
posted by jerryg99 at 2:30 PM on October 9, 2007
Best answer: Ok, Willie0248, you have another option here.
I've been in your shoes a couple of times. And what I've done is to send them a check for at least $50 or $100. It's been my experience that as long as you keep sending them money, you'll have time to position yourself to pay in full or get back to your monthly payments, which is beneficial to all parties.
posted by snsranch at 4:53 PM on October 9, 2007 [1 favorite]
I've been in your shoes a couple of times. And what I've done is to send them a check for at least $50 or $100. It's been my experience that as long as you keep sending them money, you'll have time to position yourself to pay in full or get back to your monthly payments, which is beneficial to all parties.
posted by snsranch at 4:53 PM on October 9, 2007 [1 favorite]
Response by poster: Thanks yall! I'm going to mull it over for a couple days before doing anything rash, but I think I'm going to try to negotiate for some late fees to be taken off, but otherwise pay the amount in full. When jerryg99 laid it out like that, it made a little more sense to me.
You were right, snsranch, they seem to be amenable to any amount as long as I give some sort of money to them. I was hoping there would be some crazy FDCA loophole I could use, but I guess that's not in the cards. :(
Sorry for the rant at the top of the page. I've noticed that most AskMeFi questions will get anywhere from three to ten posts down before someone actually attempts to answer any given question, and the condescension does little to improve the community (not that I am exactly a pillar thereof).
posted by Willie0248 at 5:04 PM on October 9, 2007
You were right, snsranch, they seem to be amenable to any amount as long as I give some sort of money to them. I was hoping there would be some crazy FDCA loophole I could use, but I guess that's not in the cards. :(
Sorry for the rant at the top of the page. I've noticed that most AskMeFi questions will get anywhere from three to ten posts down before someone actually attempts to answer any given question, and the condescension does little to improve the community (not that I am exactly a pillar thereof).
posted by Willie0248 at 5:04 PM on October 9, 2007
Mod note: A few comments removed. Willie0248, it's a good idea to provide thorough detail on questions like this so folks can answer specifically, and also to give folks the benefit of the doubt when you're asking for their help.
posted by cortex (staff) at 5:48 PM on October 9, 2007
posted by cortex (staff) at 5:48 PM on October 9, 2007
Do consider getting a third party to mediate. Collection agencies screw both parties.
posted by gesamtkunstwerk at 6:16 PM on October 9, 2007
posted by gesamtkunstwerk at 6:16 PM on October 9, 2007
I don't know that I totally understand your situation but I have found that transferring the balance from a card with high interest to a card with low interest is the thing to do. You do have to keep paying your present card off for up to a month while the transfer takes place. I go for the interest rates that are fixed as opposed to the 0% for 6 or 9 months deals. Good luck. (There is often a fee for the balance transfer but it is usually very small compared to what you would be paying at the higher rate over time).
posted by fieldtrip at 6:33 PM on October 9, 2007
posted by fieldtrip at 6:33 PM on October 9, 2007
As a landlord, I will rent to people who do option one. I would never rent to someone who does option 2. I don't really want to get into business with people who are comfortable not paying what they owe, it's just too risky.
posted by visual mechanic at 8:15 PM on October 9, 2007
posted by visual mechanic at 8:15 PM on October 9, 2007
This thread is closed to new comments.
I imagine it turns on how you value the 1800 versus the greater blot on your history, in light of your expected need to obtain credit in the future.
posted by Clyde Mnestra at 1:07 PM on October 9, 2007