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What Happens When An Account Is Closed
When you pay off or close an account its not available for purchases or payments.
An account can be closed for many reasons such as paying off the amount borrowed or closing an unwanted line.
Once the account is closed, its then settled and will appear on your credit report as such.
When an account is closed with a balance, the creditor will still report the status and account details to the credit bureaus on a monthly basis.
The information that is reported is the balance, monthly payment history, and the date of your last payment.
What If Its Not My Debt
Getting a spammy-sounding call from a debt collector is one thing, but seeing an incorrect delinquent account on your credit report is a whole new level of scary. Dont worry theres a way to get rid of it. Gather all the evidence you have to prove that the account isnt yours and get ready to dispute. You need to send the credit bureaus reporting the error a dispute letter explaining your situation.
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What To Do If You Want To Pay Off Debt Instead
If youd rather avoid a debt settlement, consider your options for paying off what you owe. For example, you could try a structured debt payoff, meaning you and the creditor agree to specific terms on how much youll pay each month. Your creditor may be willing to offer a restructured payoff plan if youve experienced a financial hardship or youve shown that youre committed to repaying whats owed.
You can also look into options for making your debt less expensive. If you have high-interest credit card debt, for example, transferring it to a 0% APR balance transfer card could save you money. Just keep in mind that youll have to pay the balance in full before the promotional period ends and before the regular variable APR kicks in to avoid interest charges. And you may also pay a balance transfer fee, depending on which card you choose.
A debt consolidation loan is another option. Debt consolidation loans allow you to pay off multiple debts and then make one payment to the loan going forward. A debt consolidation loan or personal loan could make sense for paying off debt if you need to borrow a larger amount of money and if you can qualify for a lower interest rate.
You could also use a home equity loan to pay off debt, though there is a caveat. Home equity loans and home equity lines of credit use your home as collateral. If you default on the home equity loan or HELOC, you could risk losing your home to foreclosure.
Codes That Describe Inquiries On Your Equifax Credit Report
There are a few other codes you may see in your Equifax credit report. These pertain specifically to soft inquiries made about you by a host of creditors, lenders, insurers, employers and others.
Your existing creditors sometimes initiate inquiries, or reviews of your credit, purely as a way to keep tabs on your credit health. These are known as soft credit inquiries. They do not impact your credit score and other people cant see them only you can.
Your current creditors may be doing soft pulls of your credit report in order to decide whether to increase or decrease your credit line. Alternatively, they may be reviewing your credit files to make you a promotional offer of some kind.
This is also the case with other third-party banks, lenders and additional entities with whom you are not presently doing business. They get your name, address and limited credit information about you but not your full, detailed credit report solely for the purpose of making you a credit offer.
According to Equifax, these are some of the notations you might find related to various soft inquiries made of your credit file.
PRM Inquiries with this prefix indicate that only your name and address were given to a credit grantor so they can provide you a firm offer of credit or insurance. PRM inquiries remain on your credit report for 12 months.
EMPL Inquiries with this prefix indicate an employment inquiry. EMPL inquiries remain on your credit report for 24 months.
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How To Remove Settled Accounts From Your Credit Report
You can remove settled accounts from your credit report before the 7-year rule.
Before you do anything, you should first assess if the settled account negatively affects your credit score or its just showing your payment history.
Keep in mind that your payment history affects your credit score. A settled account that appears on your credit report as part of your payment history may help boost your credit score in the long run since it shows that youre a low-risk borrower.
What Do I Do When My Account Is Charged
When an account is charged-off, you still owe the debt and it can be collected by the original creditor or by a collection agency.
The original creditor might make an attempt to recover it, but usually hires a collection agency to go after the debt. Even more frequently, the creditor sells the debt to the agency and steps away from the matter altogether.
Once you receive notice that your account has been charged-off, there are several options available:
- Find a way to resolve the debt with the original creditor or collection agency
- Attempt a debt settlement for less than the amount due
- Do nothing and wait seven years for the account to be removed from your credit report
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Why Do I Have So Many Student Loans
Student loans may be reported as multiple entries on a credit report based on disbursements. A disbursement may occur for each school semester attended. The numbers added before and after the account number indicate that an additional disbursement was made. These extra numbers also help differentiate between the entries.
Student loans are often sold to other lenders and can be reflected on the credit report as transferred. Because they are not considered duplicates, we will continue to report the accounts separately.
Please contact the creditor directly if you want to dispute this information or need additional information.
What Is The Difference Between Satisfied And Settled
On credit records, debts which have been repaid in full are:
- shown as Satisfied if a default has been added to the record
- shown as Settled if there is no default on the record.
On the report above, this is confirmed by the names of the creditors. Motormile Finance is a debt collector this debt would have defaulted at some stage and then been sold to the debt collector. Provident and Quickbridge are lenders there may have been late or missed payments on these two debts but no default was added. You can see the full repayment history for each debt by clicking on the purple plus sign.
There are now a large number of ways to look at your credit records and score. Some are free, some paying a one-off charge, others a monthly fee. Which one you should use depends on what sort of detail you want, see Whats the best way to check your credit record for details.
The following shows how this situation is reported by Experian. Ive highlighted two loans, the defaulted one is marked Satisfied, the non defaulted one is marked as Settled:
A debt which has been closed with an agreed full and final settlement will be marked as Partially Settled or Partially Satisfied.
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Negative Codes On An Equifax Credit File
For instance, here are a host of credit problems you may have faced, along with the Equifax letter code that summarizes or abbreviates the problem.
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Collection Account: CA
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Repossession: R
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Voluntary Surrender: VS
When it comes to missed payments, Equifax uses number codes to indicate the severity of your delinquency. So the length of your time that your payment was past due will typically serve as the number code used.
Thus, if youre 30-59 days past due on an account, it will say: 30.
Past-due accounts are noted on Equifax like this:
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30-59 Days Past Due: 30
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60-89 Days Past Due: 60
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90-119 Days Past Due: 90
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120-149 Days Past Due: 120
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150-179 Days Past Due: 150
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180+ Days Past Due: 180
Obviously, the longer you go without making required payments, the more damaging that is to your credit score.
The good news is that even if you have less-than-perfect credit, you can still get credit or a loan, as long as your credit files arent completely riddled with late payments and other negative marks.
How Long Does Debt Settlement Stay On Your Credit Report
A settled debt with no late payments will stay on your credit report for seven years from the date it was settled accordingly to regulations outlined in the Fair Credit Reporting Act . A late payment on an account is called a delinquency. Delinquencies are reported to the credit bureaus after 30, 60, 90, and 120 days of being late. If you do make a late payment, it will stay on your report starting on the date it became a delinquent account and was never current again.
If the account that you settle is a collections account, then the negative item in your credit report would remain for seven years from the date the remaining balance was discharged.
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Make A Plan To Pay Off Debt
The best option is to resolve the debt with the original investor. Ideally, you would somehow come into enough money to pay off the debt in full. If this happens, be sure your credit report reflects that the debt was paid in full.
Failing that, you should contact the creditor directly or hire an attorney to negotiate a resolution that both sides can live with.
Know how much a month you can afford before starting this process. Only agree to pay what you can reasonably afford each month. When you are finished negotiating and are satisfied with the agreement, ask to see it in writing and have the creditor/collection agency sign it. Never send money before seeing a signed agreement, especially when dealing with a collection agency.
Often a debt will be sold from company to company. Debt collection agencies can buy and sell debts without notifying you, so make sure you send the payment to the correct company. If you are unsure, you can always request verification that the debt indeed belongs to the company.
Will Settled Accounts Affect Your Credit Score
Accounts that were settled in full remain on your credit report for 10 years and will leave a positive mark on your credit. You can also settle an account when you pay less than the amount. It will remain on your credit report for 7 years and may affect your credit score. A settled account means you paid less than the actual amount owed. Since you didnt pay back the debt in full as agreed when you took out the loan, you have failed to meet the terms of your loan contract, thereby causing a negative mark on your credit report.
How does a credit card settlement affect your credit score? Closing a credit card account after settling your outstanding balances may negatively affect your credit report since it will lower your overall available credit limit and increase your credit utilization ratio. Furthermore, your credit score goes down because you only paid a portion of your credit card debt.
However, if you paid your balances in full and decided to close the account, your payment history will still appear on your credit report. Provided that there are no late or missed payments, it wont affect your credit score negatively and lenders will consider you as a creditworthy and low-risk borrower.
Debt settlement can help lower the amount of debt you need to pay and help you avoid bankruptcy. Even though theres a risk that lenders may not agree with the debt settlement, some may take the offer of a lower payment amount so they could recoup part of their losses.
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What Is Paid In Full
Paid in full means that you have completed all of your loan payments, including both the principal balance and any interest that has accrued.
If you have never missed a payment, then your account has been paid in full in good standing, which will remain on your credit report for ten years. However any missed payments will be noted on your record for seven years from the original date of delinquency.
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Im applying for a mortgage. Lo and behold, what pops up but an outstanding unpaid bill to my previous cell phone company! Who knew?
I should have known. Applying for any kind of loan without first examining your credit history is a bonehead move. Since Ive always paid my bills on time, I assumed my credit would be flawless and an advance copy of my credit report would have been a waste of money. (They cost back then this was before the days of free report.
Id long since forgotten about my prerogative to ignore my throw-down with the cell company and the unresolved $200 termination fee.
What did I do? What Peter should have done. I called the cell company and told them Id give them $100 to settle the account, provided they agreed in writing to completely remove the entry on my credit history. They agreed to do so, and sent me a signed letter to that effect. Only after Id received it did I send them their money.
So if you ever consider settling a debt, or know someone who might, heres what you need to know
If a lender tells you they wont remove the negative information, fine. Thats their prerogative. But if they tell you they cant, thats hogwash. A company that can insert negative information can remove it.
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But hey, its your prerogative.
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Is Paying In Full Or Settling Better For Credit Scores
Your credit scores matter because they determine how easily youre able to get approved for new lines of credit. They also influence the interest rates you pay and your total cost of borrowing.
In terms of how settling debts versus paying them off affects credit scores, there is a difference. Generally speaking, having a debt listed as paid in full on your credit reports sends a more positive signal to lenders than having one or more debts listed as settled. Payment history accounts for 35% of your FICO credit score, so the fewer negative marks you havesuch as late payments or settled debtsthe better.
One thing to keep in mind is that creditors may not be willing to discuss debt settlement until an account is significantly past due. So, you may need to be 90 to 180 days behind on your payments before a creditor may be willing to settle for less in lieu of charging off the debt altogether. If the creditor is reporting those late payments to the credit bureaus, then those late payments have already done their damage.
Late payments can linger on your credit reports for up to seven years, although their impact on your scores does fade over time. A settled debt status could add to the negative impact, at least in the near term until those accounts age on your credit reports.
Paid In Full Accounts
Youre probably familiar with the terms paid in full and settlement. Some people use these terms interchangeably, but they have different meanings.
A paid-in-full account means youve paid the entire amount owed and interest. If you had no missed payments, the paid-in-full account will remain on your credit report for 10 years. It will help improve your credit score, and it will show lenders that youre a responsible borrower. That will make you an appealing applicant if you decide to apply for a loan.
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Is There A Debt Settlement Repayment Calculator
Are you wondering if theres such a thing as a debt settlement repayment calculator? Many people ask this because they want to know how much they would have to pay to settle their debts. While some advertising might make it sound like up to 80% of your debt could be forgiven, or written off, that is unfortunately the exception and not the rule. Debt settlement arrangements are specific to someones individual circumstances, and creditors expect someone to pay as much as they can.
Should You Settle Credit Card Debt Contact Us For Help & Information
So this begs the question, should you settle credit card debt? The answer is, it depends. Credit card settlement is one form of debt relief there are, however, a number of other options and solutions to consider before you decide that a settlement is right for you and your long term financial goals.
Contact us to find out about settlements, debt repayment programs, and alternatives to bankruptcy. Through our anonymous online chat or were available to answer your questions and provide guidance and information to help you make an informed decision about how to best handle your situation. Or book a free, confidential appointment with a professional credit counsellor to review all of your options in detail by . You will sleep better and eliminate your worry knowing you have a plan to deal with your debts.
Speak with a non-profit credit counsellor.
Debt settlements are just one of 7 debt relief options available in Canada . Before deciding to pursue a specific option, it would be wise to speak with a credit counsellor, review your situation, and determine which option is going to help you achieve your financial goals. Speaking with our counsellors is always free and confidential.
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