Friday, October 5, 2007

Net Worth over Credit Score

So yesterday,

much to Single Ma's dismay, I decided to take the collection company's offer and took their 'settlement in full' deal. I decided that my Net Worth and getting behind my debt is more important than 'fighting' with the collections company and my temporary credit score.

Yes, the settlement in full will likely negatively affect my credit for a few years to come but, a settlement in full is much better in my opinion than to have it drag on my credit score for a few months while I spend time and energy researching archaic pieces of the Fair Credit Reporting Act and trying to find a loophole out of it.

Honestly, I don't think the damage done will be that bad. When I first discovered the blip on my credit, I noticed that while my score had gone down about 40-60 points, the drop still left me within the 'good credit' zone as my scores ranged from 688 -710. However, I panicked, ran out and got a 0% credit card that wasn't used until this week (to pay off the $200 settlement balance) and this in turn took another 10 pt hit to my lowest score of 688 to 678 - or average.

So now I have average credit but, I'm guessing the settlement of the debt will raise my credit score further - although at a slower pace - and eventually I will be well back into the 700's (good-great) range. Especially when I correct some errors on my credit report about address, employer and even ending balances on accounts.

More important to me right now is raising my net worth as well as my cash flow which is currently pretty low. I don't plan on buying a house for another two years and I'll probably be married by then...which brings up a whole 'nother issue entirely.

I am trying to get engaged in the next 3 months or less and although it may seem small to some that $600 discount/income/whatever will definitely help me shop for a ring faster than sitting, worrying about the debt, and stressing in general over a piddly $1,600, blind-siding collection.

On top of an engagement ring I am planning a benchmark, surprise birthday party for a relative with little help from another relative (i.e., Dobson) - thus far. The birthday party will set me back at least $250 and most likely more as we are planning to pay for the tab.

Ultimately the decision to settle-in-full is one less worry for me. I'd bore you with my other over-stretched obligations (investment club) but I think I've ran long on this post already.

Thanks for reading!Enjoy your weekend.


Single Ma said...

HA HA you played right in their hands. *smh*

This statement makes no sense to me:

"...the settlement in full will likely negatively affect my credit for a few years to come but, a settlement in full is much better in my opinion than to have it drag on my credit score for a few months while I spend time and energy...

If you say so. But umm, do you fully understand what a "settlement in full means?" Not what it should logically mean, but according to their industry standard? Probably not.

And FYI - there is no "loophole" to find. Convincing a collection agency to remove a negative tradeline in exchange for payment (in full or settlement) has nothing to do with the FCRA. It is a negotiation strategy that would ultimately kill THREE birds with ONE stone - satisfy outstanding debt, improve net worth, AND protect your credit history. I see no downside to negotiations, but if the act of persuasion is a skill you lack, then just admit it.

Further, it wouldn't have taken months to finalize the agreement - perhaps a week at most - because negotiating is not a "fight." It's simply an exchange of benefits when BOTH parties have something to gain AND lose.

Finally, although it doesn't apply in your particular case, the FCRA is a law governing all entities that subscribe and report information to the credit bureaus, but the FDCPA specifically applies to collection agencies only.

These laws are most useful, in part or in its entirety, if the debt was NOT yours. Clearly this doesn't apply to you so I'm not sure where you are drawing the assumption. However, if it did, the collection agency will simply be forced to adhere to a law they are mandated to operate under. Call it archaic if you must or even a "loophole" if that's what you prefer, but no one is excused for being ignorant of the law.

At any rate, I'm happy to hear that you made the best decision for YOU. In the end, it's the only thing that matters. However, I will not be surprised if they sold the balance of the "settlement" to another collection agency who will then put another negative tradeline on your credit report and come after you to collect the balance PLUS their fees. This is a VERY common practice in the collection industry, which could be avoided with proper precautions.

I hope this doesn't happen to you, but if it does, I promise not to say I told you so. :-)

Reggie said...

Thanks for the 'words of encouragement' Single Ma.

I do believe I did what was best for me and in the end that's all that matters.

I'll be the first to let you know if if the medical collections company sold my debt to someone else after faxing me a letter stating the exact opposite. Thanks again.