How to settle with a debt collector
Paid-in-full collections are better than settled.
Depends on who you ask. If it's not possible to get the
account removed from the report, Jamison suggests settling. He says
this can prevent the resale of your debt, prevent a lawsuit and
alleviate damage to your credit report and credit score.
Collection agencies will act as middlemen during the
deal, says Jill Jensen, director of Omnium Worldwide Inc., a collection
agency. She says Omnium's clients, which include banks, credit card
companies and phone companies, will define the parameters for settling.
client will have payment criteria, for instance, on when the account can be paid,
what kind of terms can be offered and in what situations the agency can offer
the settlement," she says.
For example, she says, a client
may tell the debt collector, "The options we have are payment in full or
no more than three payments spread over 90 days."
says the client will expect Omnium to gather enough information about the consumer
to decide how much to deviate from the preferred payment in full.
the customers' financial situation is such that other terms might be appropriate,
we would act as the conduit to the client and seek permission to set payment terms
or settlement outside of that area."
If you choose to
settle, do so for as little as possible, Jamison cautions.
better to save 50 cents on the dollar and lose a couple points off your credit
score by having a settlement as opposed to 'paid-in-full,' because the collection
and the charge-off notation is what's hurting the account," he says.
explains, "As far as the FICO credit risk score goes, the paid-in-full status
is going to have little, if any, affect on the person's score."
You can be sued after the statute of
limitations period ends.
True, technically, says Baird,
but only if you reaffirm the debt.
Generally, the statute
of limitations is the amount of time the debt collector can take legal action.
This action can include a lawsuit or having your wages garnished. The time period
is set by individual
American Collectors Association International,
or ACA, a trade association of third-party debt collection businesses, says the
statute of limitations is longest for documents that have been notarized by a
notary public, while it is shortest for actions on open or revolving accounts
such as credit card debts.
The countdown begins on an accounts'
last activity, according to ACA. It can restart with a partial payment or a written
promise to repay, which reaffirms the debt, depending on the state law.
It's suspended if a consumer leaves the state or is
sent to prison. However, the statute doesn't prohibit the collector
from going after the debt, it merely prevents the collector from
taking any legal action, such as filing a lawsuit or garnishing
Jamison says any time the statute of limitations has
expired, you probably don't want to settle.
If you choose to settle beyond the statute of limitations,
Jamison says the company is more likely to agree to delete the account
with payment because the company knows it can't sue.