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Question for the Money Doctors

Question submitted on May 1, 2012.

Question

I had a question on how a settlement would appear on a credit report. I have a student loan that is with a collection agency.. it will show up as past due until it is paid off. Would it be a large ding to my score to pay a settlement and get moving towards a better payment history?

Answer

I would suggest that prior to paying you contact the studen loan folks. If they will negotiate a settlement (obviously if the collection agency will, they will) add a condition to the settlement . Have them agree to not report this to any credit bureau. They CAN do this (and often do).

If the student loans folks won''t agree, THEN contact the collection agency.

MAKE SURE YOU GET THIS IN WRITING PRIOR TO MAKING A PAYMENT.


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