Good CC and Bad CC – Lump Sum Payoff?
Question: When I was younger I messed up with credit. I had a join CC and some other department store credit cards that at that time I ended up maxing out and with no income just stopped making payments. That was some 7-8 years ago.
Well things are looking up now, and I want to get my credit back on track. All this time I have still maintained just one credit card that I have kept current without issue. However, on pulling my credit report today I have found 2 collections for the department store ones (CND Tire and Sears) , and one for Capital One credit card, which to my shock is now sitting at just over $11k. The last balance I recalled having on it was for about $7k back in 2003 I think. The other two together amount to $4900.
So I am looking at about a total of $16k in bad debt on my credit against my one credit card that is perfect. This is based on Trans Union info at the moment. Equifax online wouldn’t generate my report right away, so I have to wait till Monday to find out what might be on there.
There is no way I can cover $16K any time soon and I need to get this settled fast. I don\’t want to do a consumer proposal as that is just as bad as declaring bankruptcy with a ding to last 3 years instead of 7, and I don\’t care to get my current good credit card involved.
I have gotten numerous offers from the capital one collection agents to settle on my balance for something like $5000 to clear it.. but to tell you the truth, I don’t trust collection companies. I think I will make that payment and then they will start harrassing me to collect on the rest of the balance.
I currently have about $6000 that I can use to pay down my debts and clean up my credit history. I want to fast track this cleanup though, and would like to know if it isn’t unheard of to contact these people individually who say I owe them and offer them something like $0.40 on the dollar with one single payment and agree to remove it from my credit history, or at least show it as paid. If I get them to agree to this, will they, or do they, usually honor it? Will it show up on my credit history as cleared? Should I get them to send me something in writing to agree to this before I proceed with payments?
After this I guess I will be busy getting secured credit cards and building up more of a positive profile.
My goal is to get this turned around in 6 months. Am I dreaming? Or can it be done?
Answer: The advantage of a consumer proposal is that it’s a legally binding settlement; once accepted, the creditors cannot change their mind later. However, you are correct, there is a note on your credit report that remains for three years after the proposal is completed.
Another possible option, if you want to propose a lump sum settlement to just the credit cards that are delinquent would be to use a lawyer to negotiate the settlement. That way you get a legally binding settlement, on terms acceptable to you, with less impact on your credit report.