Paying them off Well, if what you're saying is he's making small payments to Citi and to Beneficial... the best thing would be to make sure they're counting... for example: he can call the 2 creditors and discuss the payment plan. If he's not currently making minimums (or can't catch up the accounts) then they'll charge him fees (late, over the limit etc). He may wish to make payment arrangements with both companies. Citi should do this. I'm not sure about Beneficial. By making an arrangement that he can afford now, he can stop the history from continuing to be derog. The last 24 mos count the most, so current payments will start outweighing past late pays.. and negate them greatly at 25 mos.. So the fastest way to rebuild credit would be to make payment arrangements and keep them. After he makes these payments, in the future he could ask for goodwill adjustments and maybe get them. If he lets them charge off it'll take a while to have that happen, then if he pays a settlement the accounts will be so artificially increases (2-3 times the original amount) that even with a settlement he'll pay about the same amount. But that will need to be lump sum. As to his credit with that method, it's worse. Trust me. I did it. You get 2 hits per account, original creditor and collection agency. Citi is the most aggressive collectors I've ever seen... they'll send the account to multiple collection agencies. They might make mistakes, yes, but that's a gamble. If they do and you sue, you might get deletions, but again, the accounts would have to be paid. Either you or your son would have to be able to come up with 30-50 percent of the balance (highly inflated after several years)... so, the fastest? getting a payment plan that the creditor agrees will keep the account current. The least expensive? likely about the same overall due to the overinflation effect. But if he can't make payment arrangements and then keep them, well, what's the choice? He'd have to let them charge off. A charge off, paid or not, is much worse than an account that's had some late pays in the past but is current or paid off...
Re: Zip code? Thanks for everybodys input, especially the ones that took the time to read the details, not make assumptions. After reading the posts, I agree that paying is better than charging off. Some things for those that did not read the details, or posts from others here familiar with Texas, etc. First.(Insurance costs in Texas), Under 25, male Once again my Sons insurance on a 1987 Sentra, liability only was $244 a month. Not a huge difference from the Acura. Two. (Price of the Car) His college is on 3 campuses that are quite a distance from each other(2 different cities) and work. He had an older car, him and I couldn't afford the repairs. It died and I helped him nuy the Acura. He did not pick the Acura, I did based on the Lease deal from Acura, and the reliability of their cars. Three. (Why am I asking questions, instead of him?) Because just like many people that find this board, he does not know there are choices, and like most things in life, an informed decision is better than just doing what appears to be your only choice. I help many people with credit by sharing my knowledge and resources with them, just like people do on this board. I doubt you would have a problem with that. Four (Insurance on a lease is double a purchased car) Not true. His insurance is only %20 percent higher than a 1987 Sentra with liabilty only. I have leased several cars in the past 10 years, none have been substantially moore expensive than a buy. Five (Switch insurance to another company) I drive sports cars and companies like Geico won't insure me(not him). I have been with Farmers and my agent since 1987. I have Home and Auto. It is not as simple as some people imply to just switch. The insurance issue is very complicated. In Texas, many companies have pulled out of the State. You must be careful here. Otherwise you will wake up to find you have no insurance. Two other things. 1- All I wanted was to understand if paying off or charging off accounts, would lead to clean credit report the quickest. I do not expect clean credit next month. I just want the shortest number of years(like other people on this board). Since most people here are very detail oriented when it comes to the credit laws/rules, I was extremely suprised at how many people made asssumptions without knowing what the Texas insurance situation is and how my personal situation affected the situation(ex. Geico won't insure me because of my sports car, rated for lease cars). And BTW if I decided I made a wrong decision buying the Acura, I cannot just return the car as many suggested. I have an obligation to fulfill on the car, and I do not blow of my agreements. Since many said my son has too expensive a car, his $279 a month payment is equal to the the cost of a 10k dollar car +ttl for 48 months. He has no maintenence costs, repairs, tires, etc. 2- I have an 8, 12 and 20 year old. All I want for all my kids is the best that I can do for them. On top of that Since my wife died 2 years ago in March, I feel sorry for them. (She was deathly ill for 5 years including dialysis, over a hundred surgeries, a kidney transplant, cancer). I don't over do it, but they deserve something. I doubt there is anybody out there can't understand that.
Re: Zip code? OK, perhaps Texas is different, BUT in most States the minimum required liability is 10/20/10.or in N.Y.20/40/20. On a lease car you HAVE to have 100/300 . I was not saying that the SAME liability coverage costs more on a lease, only that you are required to HAVE a higher amount of coverage.
Re: Zip code? You are probably right. I personally would never carry state minimums. In Texas I think it is 20k damage, 20k PI person and 50k total per incident. 20k won't pay off the average car these days. The personal liability is to great in my opinion for such limited coverage. Plus if I hurt somebody, I would like their medical bills to be covered. Therefore I already caryy 50/100/300. I have compared the price difference between the minimum and my 50/100/300 and it is so minimal, the personal liability risk isn't worth it. Just my opinion, but thanks for sharing yours!
Re: Zip code? I thought he was paying $350/month for insurance? That is a big difference. $106 more per month = 42% more, or $1272 more per year. I'll bet that extra $1200 would be almost enough to pay those accounts off in full. I understand the need for your son to drive a reliable car to work and school, but a new car is not always the best and only solution. From personal experience, I've driven several used cars (Hondas) that have turned out to be virtually hassle free and extremely reliable. For the cost of less than $5k, I think it would have been a better choice for now until he's out of school with a real job. Just my $0.02
$1000 for 6 months, or $166 a month is (although still high) a heck of a lot more reasonable than $350 a month. Someone pointed out above about this being more of a budget issue, and I think that's a valid point. Two c.c.'s with those balances would have minimum payments of no more than $30 a month per account. $60 a month should not be a problem to handle. If it is, then it's quite obvious the insurance (especially) and car payment are getting in cash's sons' way of paying on the credit cards.
Geez, cash...I'm so sorry about your wife. I must have missed that in the first post. What a good daddy you are in trying to help your son out. Hang in there! L
My original questions were credit related. How can he end up with a clean credit report in the shortest time? The same goal most everyone on this board has.
Cash 1 The kid is only 20. The best way he can clean up his reports is pay his bills on time and in the agreed amount month after month after month like most of us do. As he gets older, the positive tradlines will be older and more valuable and the negative stuff will be older and less important. There's no quick fix here. Maybe in a year or so when he has paid down these last 2 bills, he can request a "goodwill adjustment".
As I stated before, 20 year old males have to pay a high price for the priveledge to drive.(At least here in the DFW area) And yes it affects his budget. But he would be unable to attend school without reliable transportation(3 seperate campus's in 2 cities). I am not the kind of person to work on broken cars. Like many on this board I am a computer geek. But I cannot just give back the car, nor do I think it is the correct thing to do. Hopefully when het turns 21 this summer, he will get a decrease on the next policy renewal. What I want to do is guide him in the right direction with his finances. Since I do not have long lists of late payments on my accounts, I just wanted to know from the other creditnetters experience, how to deal with the accounts to provide damage control. The questions I originally asked about letting the accounts go delinquent, were questions based upon what I have read on this board. Peolple have stated that they made mistakes in paying or how they paid things off. They then had paid their obligations and still had negative credit, with no leverage to get it removed, other then sending nutcase letters.
Cash1, I would tell your son to get current with these accounts, stay current and further down the road ask for a goodwill adjustment. a couple of benefits is that this may result in positive trade lines that have a decent age. In my opinion, this is better for him in the long run. If the payments are not that high, he should be able to swing it. Summer is coming up soon, and he should have time off from school to maybe pick up another job to get these accounts paid off.
Cash.... I understand what you are saying. However, the vast majority of the posts here regarding witholding payment on accounts relate to accounts that had already been charged off or are in collections. I don't recall anyone here (other than Lizardking) saying they were better off by just bailing on on an account that was still in good standing (or at least not charged off or in collections). The reason I said it was a budget issue was becasue that's exactly what it is right now. Bailing out will QUICKLY turn it into a credit issue but that is not the case as it stands today. Although you disagree, I still stand by the notion that the answer to his situation is to return the leased car (if possible) and buy a lower-cost $3k-$5k car that will get him by for the time being. The money he saves on car payments should then be directed to his 2 CCs to pay them down. You need to move away from the idea that all used cars are clunkers and will not last. I bought a 1994 Taurus wagon 2 years ago for $6K and it's gotten me to/from Vermont twice (I live in southeastern PA). What we are trying to do is give you advice that can prevent this budget issue from ever becoming a credit issue in the first place.
Thanks whyspers. My 20 year old son was extremely close to his mother, and he really handled it well(at least on the outside, I know he held a lot in). I do really feel sorry for what all my children went through, the hospitals, surgeries, mom throwing up 24 hours a day, 7 days a week, for 5 years, ambulance visits to the house at 4am, and especially the relationship they can't share with her as they grow up(I have a 8 year old boy and a 12 year old daughter). So when my kids need things(like a car) I try to give a little extra to help make up for what they have gone through. I know you can't make up for it with money, but at least it's something.
you may wish to call Citi and Beneficial with both you and your son on the phone. Citi is a company that he may wish to keep a relationship with in the future... so working this out now before it charges off is a good idea. You can work out a payment arrangement, but you want to make sure that the payments are making the account show current from now on... if you explain that you want him to pay his debts and also restore his credit and his relationships with Citi and Beneficial... that may help the reps understand your goals Meaning: if he's 400 past due on his mins and he makes 25 a month payments for the next 12 mos... he'll still be reported very late for those 12 mos... because the 25 payment won't catch up the 400 in past due minimums... so if he's stuck at an r8 or 9 he'll still be stuck there even after making payments... But, if you call with him and just explain the situation, they just want their money one way or another. Tell them you need to make arrangements for his payments... ask if they're set at 3 percent or 2 percent. WHile it's not ideal to have 2 percent payments, it might help him right now. anyway, get them to agree (in writing) to a payment plan. Explain you'd like to "catch him up" but don't have any extra money right now... can they "restart" the clock on his minimums... or something like that. Be honest, explain why your family has had a rough couple of years... (sorry about that, by the way)... anyway, just talk to them like humans. That works a lot. If you explain you want him to be back on track on his payments and ask them how can you and Citi work that out, I'm sure there's a way. If you don't get a good answer from a rep, talk with a supervisor. Also, if he's been hit with a lot of fees, it doesn't hurt to ask for some refund... perhaps they could even do a deal where he makes 3 on time payments and gets x back in fees... I don't know what they'll do, but it always is good to ask They understand that a 20 year old doesn't always see the long term ramifications of bad credit, now he does and you know about the situation and would like to help... but given the circumstances your help is to make sure he gets a way to rebuild his relationship with Citi... they'll appreciate that, hopefully They deal with this all the time, after all, they solicit heavily on college campuses. perhaps if Beneficial is an installment loan, maybe they can tack the missed payments onto the end of the loan and restart his payments from now on to count him as current... installment loans have some nice options too... again, you may need to talk with a manger and if they agree to a plan, get it in writing. if it's not in writing, it doesn't exist. Good luck on the credit issues. As an aside, I think the 2000 Acura Integra is an outstanding value of a car. The payments are reasonable and the car is amazing in reliability. I had a huge accident in an Integra where I t-boned into a Ford Taurus... both cars were a total loss. I had no time to brake so I hit at almost 50 mph... my car rolled up like a sardine can and the inside passenger compartment was fully intact... I was hurt pretty badly but not squashed or killed... the Acura protected me and in the insurance settlement I got a lot of money for my total loss (eventually)... the car really held its value over the years so the car is an outstanding choice for a college student. He'll save a LOT of money on repairs he won't have to make on an older car of lesser reliability. I hardly had to fix ours and that saved me a lot of money. We even had an Integra for over 11 years and the reliability remained the whole time... good choice. With regular maintenance I think one might last forever Sorry to hear about your insurance. But I also agree with you... being underinsured is stupid and males are expensive. At 21 his rates should decrease, and if his deductibles are 500 or 1000 on both comprehensive and collision then you're doing well on discounting the insurance. My poor dad paid on 3 boys driving his cars at the same time (they're a year apart)... he later said he wished (for insurance rates) that they had been born girls The car is a necessity, he has to go to college and do well. that will protect his future the most. the credit cards were luxuries... but we all have to learn some things the hard way... so at least he's learning now so he'll protect his credit after this, I'm sure. anyway, good luck. If you guys have Liberty Mutual you might wish to look into their policies. They cut my rates in half.. also, if you have any close military affiliation, USAA has amazing insurance rates. I know your main question is credit, we just can't help it if we see huge insurance rates... we want to help on that too as it would provide the money to make the credit card payments ...
Re: Paying them off Very good answer to the original question Marie. I'm glad that we finally got to the answer and why. My two cents? It's a great deal on the car, he's making the payments, and hopefully he will put the time he is saving by not having to ride the bus to good use. CBJ
Thanks so much. What a postive post This is exactly the type of information I have been looking for since I started this post. I will call Citi (BTW I have a Platinum Citi Card) and like you said, maybe as an adult and customer I can help negotiate something that will be more positive, than just paying minimum late payments all the time. Beneficial I am less optimistic about. Also, thanks for the Acura information. His car is a good, fuel efficient and safe car. I am glad you had good experiences with yours. And thank you for understanding that a young males car insurance is expensive on any car. But you have to have it
Cash, I will give you my opinion and you can take it as you see it. Your son would be best served by getting his education done to the best of his ablities. To HELL with the creditors...as long as he makes the minimum payments (but not a penny less) that will be O.K. with them. After your son has finished college and found a good job, he should call the creditors. Ask them to remove the late charges based on all the interest they earned from him, being a steady customer for so many years, paying the account as stated, etc. This is where the reality will hit. If they *really care about him they will go back as many months as he made a late payment and remove those charges. They will already earned 1,000 times more in interest than a few late charges so it shouldn't be a problem. However, if it is a problem he has a few choices. One would be to make sure his wife (I'm assuming he will be married) is not on any of this card and she has her own. Second part of the plan is to have already purchased a home and put it in her name. If the creditors want to be a bunch of a**holes then he can just unload his debt to them in BK and he still gets to keep everything. Of course the best choice would be to pay the good people (sarcasm implied) at Beneficial and C*ti their money every month even if it means forgoing his education. He can take a few summers off to work the debt down and not be enjoying his life correct? How irresponsible of him to run up such debts and not pay them off (sarcasm implied) ! I would say to anyone who thinks paying a creditor is a moral obligation, look at some of the terrible things they have done to poor people, black people, etc. Credit is nothing more than legal loansharking. "If you pay everything is cool". "If you don't pay we'll hound you till the day you die, take your house, tell your employer and basically make your life a living Hell". Good luck to your son and you. Robert
