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what your take on settlement paid less then owe on good paying account

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I had the account with one of the credit unions, they made mistake send out notice said I can settle the account for 50% of what I owe which is about $6000. I was told since they made a mistake they will honor this, however, they will report paying less than what I owe to credit report and I will never able to borrow money from them again, they also said it will hurt my credit score. the account is perfectly paid on time. what is everyone take on this?
 

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I think Pepsi > Coke, sometime.

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ZenNUTS said:   I think Pepsi > Coke, sometime.
  Blasphemy!

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If they say you can settle for 50%, it kinda implies you haven't been paying in the first place. You sorta left that detail out of your little story. No sense for them to cut their losses if the account is "good paying."

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Was the title or OP edited? He says they made a mistake by offering the settlement, and they agree it was a mistake.

I'd want to find out a lot more about how much a $3k writeoff will impact my credit score and what expectations I have for near term credit. If I had plans for a mortgage within the next couple of years, it's probably not worth it. But it might be if my only credit plans were the occasional signup bonus. Some specific anecdotes about the credit hit are the key though, and I don't think you'll get much info on that here.

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If you are in good standing and it was a mistake I would ignore it and keep paying.

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It would be unethical to take advantage of this sort of honest mistake. Nice of them to offer to honor it, though.

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$3,000 doesnt seem worth the "settled" designation on your credit report.  It'd be a different story if your current balance was $60,000.

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What is $3000 worth to you?
1. No future borrowing (credit card, mortgage, HELOC, loan, etc.) from the credit union
2. Derogatory information on credit reports
3. Perhaps loss of credit union membership

Since there is an offer to honor the mistake, ask them to lower your interest rate instead and agree to continue to pay.

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rawman1 said:   What is $3000 worth to you?
1. No future borrowing (credit card, mortgage, HELOC, loan, etc.) from the credit union
2. Derogatory information on credit reports
3. Perhaps loss of credit union membership

Since there is an offer to honor the mistake, ask them to lower your interest rate instead and agree to continue to pay.

That's pretty much what it boils down to.

Except the credit score impact may make borrowing from others also more expensive until it recovers. So if you have a big loan purchase (car, home) in the near future, you could get a higher interest rate meaning it could cost you more than $3k alone.
 
If OP also needs good credit for credit card sign up offers, opportunity cost there could amount to more than $3k.

Finally, and not insignificantly, there is the tax treatment of forgiven debt. Creditors who forgive more than $600 in debt (so definitely in the case of $3k), are required to file a 1099-C form with the IRS and OP doesn't sound like he'd be exempt (no BK, no insolvency). This forgiven debt would be treated as gross income for OP and hence taxed at his marginal tax rate. So assuming 25% marginal rate, that takes the profit down to $2250, not counting potential state tax income on it.

Personally, for after tax, barely above $2k profit, I would not take the credit score hit for this little.

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Ask them if they can award you some type of promo bonus or credit to your account instead, like the kind that banks offer for opening accounts or credit cards.

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I wouldn't take the offer, but as others have suggested, ask for something else in return. However, if the credit union is good, the way they handled this would be a strong factor in considering giving them more accounts, putting more on deposit there, etc.

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well to update everyone, I never edit the original post nor I did take the offer for settlement. I did ask them to give me the lower interest in return but they can't do that either. consider 3k is a small amount I didn't take the offer knowing it could risk my credit.

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