I received a letter from a CA saying CAP 1 has authorized them to make a settlement offer of a certain amt by 10/24/2007. It is saying that they and CAP 1 will concider the acct "paid by settlement" and will issue a release stating the acct is settled with no further obligation due to the CB's. They will be updated showing a "paid by settlement" status. How do I respond to this? Won't this still be a negative on my report? Should I still just send the "pay for deletion" letter or the "dept validation" letter?
Just my $.02, if you want it removed from your credit report, you'll probably have to settle for the full amount owed. But, from what I recall, Cap1 isn't favorable to those types of agreements. You could go the debt validation route but that would probably cancel any settlement offer and in the worst case scenario, you could end up having to pay all of it AND have a negative entry (or two or even three) on your credit report. So it depends on what's important to you.
A settlement offer is a legal tning. If they state that the debt would be considered paid - that what it will be. They may even delete all credit agency reportings regarding this account, and don't even list the account anymore. BUT - if the forgiven amount is $600 or more they will send you a 1099 tax form and you will have to list the forgiven amount as income on your tax return.
If this is truly your debt and responsibility, then the first thing to analyze here is whether you have the means to pay or settle this account? Do you have the funds available to pay in full, or the settlement amount? You are in a pure negotiating situation, so what do you have to negotiate with? They want your money, you want the best credit reporting you can get. So, ask if the CA will consider a "Pay For Delete", for the full amount owed. If they accept, get it in writing BEFORE paying. If they will not accept, then a "settlement" is probably the next best option. As for your credit reports, even if the CA removes its account from your tradeline, the Cap1 tradeline will still report as a Charge Off. So, accept that this is a fact of life for now. If you can get the CA account off your credit reports, this will help your FICO score. But if you can't, then it counts the same whether Paid In Full, or "Settled". The fact that it went to collections is all that concerns the FICO model. So, call them and ask if they will delete the account from your credit reports in exchange for full payment (if you can pay it). If they verbally say "Yes", then ask for the agreement in writing. If they say "no", then I would take the settlement, and still ask for a document detailing how this will be reported on your credit reports. A key question to ask the CA is whether they "own" the debt, or are acting as an "agent" for Cap1. This will give insight into their negotiating room.
You might also consider the bigger pictures. Sometimes, after an account has been charged off, the credit companies delete the info from their computers after a year or so. So... Settle for the lesser amount now and live with the paid chargeoff for now so at least you have the matter closed and done with (even if you have a negative 'ding' on your report). Then, in 18 months or so, dispute the trade line on your CR. If the company has purged you, they'll delete the line. Slow, to be sure, but it accomplishes your goal of closing the debt and moving on as well as getting it off your CR (eventually).
I would strongly suspect that Cap One still owns the debt. In fact, I wouldn't be surprised if the CA is owned by Cap One. Cap One tends to retain their accounts, not sell them. And they are very, very hard to get removed from your reports.
Both Hedwig and Cob are correct in their presumptions. However, Cob is on the right track about being able to delete the account once it is paid. Go ahead and pay it for two reasons: 1) it will stop reporting each and every month as an unpaid charge-off with a delinquent balance (helpful in the short term) and 2) dispute it after about a year and it will be deleted. This is typically the result and is generally the best way to handle Cap One is you're not litigation inclined or if the balance is larger than $5k.
Okay. I'm getting frustrated. i'm also noticing that the two CAP 1 CO's seem to still be accruing interest. Can they still charge interest if they've been "charged off"? What can I do about this in the meantime? I don't have the available funds to pay the total settlement amount, all I could do would be to make payments. At this rate, they'll never get paid. HELP.
Yes, they can still accrue interest if it's allowed by the agreement. "Charged off" is an accounting term meaning they've removed it from their books as an asset and have charged it to a bad debt account. It doesn't mean the debt has gone away. And, as I said, Cap One is a tough one to deal with. How much could you afford to pay for a settlement, and how much could you afford to pay on payments? How much are the debts?
