If I Negotiate a Payoff, Will It Hurt My Score?
Settling debt does come with repercussions.
Q: I'd like to cancel out my looming credit-card debt but keep my credit score intact. Is it possible to negotiate a cash settlement with a card issuer without ruining my credit score?
Row 0 - Cell 0 | Why Is my Credit Score Dropping? |
Row 1 - Cell 0 | Will a 401(k) Loan Default Hurt My Credit? |
Row 2 - Cell 0 | Search for Low-Interest Cards |
Settling your debt for less than what you owe will likely lower your credit score a lot. True, if the issuer were to accept the lump sum and simply close your account, your credit score would not suffer. But that's not likely, warns Steven Katz, a spokesman for TrueCredit.com, a consumer-credit Web site owned by Trans-Union. The usual practice is for the issuer to report the number of days the account was delinquent and that the debt was settled for less than the full amount.
That would have a serious impact on your score, says Craig Watts, of Fair Isaac, the firm that created FICO scores. The impact on your score would lessen over time, but the black mark would remain on your credit report for seven years.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
But don't let your desire to keep your credit score intact prevent you from tackling the problem. Talk with a consumer counseling agency to see if a debt-management plan would work. That could be less damaging to your score than a settlement, says Gerri Detweiler, an adviser for Credit.com, a credit-education Web site. If not, try to negotiate a settlement -- but make sure that the creditor does not send the balance to a collection agency.
-
Strategies to Optimize Your Social Security Benefits
To maximize what you can collect, it’s crucial to know when you can file, how delaying filing affects your checks and the income limit if you’re still working.
By Jason “JB” Beckett Published
-
Don’t Forget to Update Beneficiaries After a Gray Divorce
Some states automatically revoke a former spouse as a beneficiary on some accounts. Waivers can be used, too. Best not to leave it up to your state, though.
By Andrew Hatherley, CDFA®, CRPC® Published
-
403(b) Contribution Limits for 2024
retirement plans Teachers and nonprofit workers can contribute more to a 403(b) retirement plan in 2024 than they could in 2023.
By Jackie Stewart Published
-
Roth IRA Contribution Limits for 2024
Roth IRAs Roth IRA contribution limits have gone up for 2024. Here's what you need to know.
By Jackie Stewart Published
-
Four Tips for Renting Out Your Home on Airbnb
real estate Here's what you should know before listing your home on Airbnb.
By Miriam Cross Published
-
Five Ways to a Cheap Last-Minute Vacation
Travel Procrastinator? No matter. You can pull off a fun and memorable getaway on a moment's notice — without breaking the bank.
By Vaishali Varu Last updated
-
How Much Life Insurance Do You Need?
insurance Instead of relying on rules of thumb, you’re better off taking a systematic approach to figuring your life-insurance needs.
By Kimberly Lankford Published
-
TransUnion Fined $23M For Tenant Screening, Credit Freezes
Government charges TransUnion over illegal rental background checks and security freezes on consumer credit reports.
By Joey Solitro Published
-
When Is Amazon Prime Day?
Amazon Prime In 2023 Amazon had two Prime Day events — one in July and another, called Big Deal Days, in October. We expect 2024 to follow the same schedule.
By Bob Niedt Last updated
-
How to Shop for Life Insurance in 3 Easy Steps
insurance Shopping for life insurance? You may be able to estimate how much you need online, but that's just the start of your search.
By Kaitlin Pitsker Published