I spoke to my credit card company and gave me two options. They can let me close the account and offer low APR so I can pay it off in 5 years. By doing so, my minimum monthly payment goes down from 400$ to 0. They also advise me that I can settle the total amount of the debt in that case the debt can be reduced ~30% however they warned me that my credit score can be screwed. Does anyone know how much it will affect my credit score? I have 3 credit cards with that bank and does it mean I will have three settlement?
THanks,
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Sun, Mar 22, 2009
March 22nd, 2009 at 12:20 am
Your credit score will drop below 600.
They might bundle all 3 settlements. Or do them separately. However they want to handle them for accounting purposes..
March 22nd, 2009 at 12:20 am
Not only will your credit be screwed ("settled" will be visible on your credit report for 7 years), you will owe income tax on the amount not paid.
March 22nd, 2009 at 12:20 am
Has this card already been charged-off as bad debt? If so, you need to realize that the damage to your credit has already been done and that the paying off in five years option would not be advisable give this fact.
If you are current, then the settlement will damage your credit rating, which might cause any other creditors to raise interest rates on their cards…They have the right to do this.
- Settled/forgiven debt is treated like earned income by the IRS….You’ll have to add the forgiven debt to your income on next year’s income taxes and pay whatever additional taxes on that.