Be Cautious of Credit Card Settlement Offers
March 5, 2009 by VideoCreditScore-Andy
Filed under Episodes
Careful: Credit Offers May Be Damaging to Your Credit Score
After I did my post about American Express offer of a $300 gift card to close down accounts, I decided to look for other offers consumers were seeing. By far and away, the most alarming is the settlement offers some banks are pushing and/or consumers are asking for.
Some financial bloggers have recommended calling your credit card company and stating something like this:
“I’ve got $10K to pay off debts and I owe you $15K and another credit card $11K, so what can you do for me?”
As the credit card issuer is concerned that you will default, they are willing to do what they will do anyway when they turn it over to a collection agency – accept pennies on the dollar. In this case maybe 50 cents on the dollar or 75 cents on the dollar.
Here’s the issue with this. In most cases, the credit issuer is not going to report your settlement as “paid in full” and this settlement will scar your credit score for the next 7 years. You could end up moving into a higher paying job and able to pay down that debt, but if you settled, it could be a red mark that will scare future lenders away.
I’m not saying settlements are never a good idea, to the contrary, in many cases they are the right course of action. But, it’s important to have all the facts before you proceed with a settlement and understand the long term impact to your credit.
