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What happens to an R9 after you settle the debt?

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  • Jul 12th, 2012 9:48 pm
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[OP]
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Apr 26, 2012
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What happens to an R9 after you settle the debt?

Hi all, title basically says it.

Just settled a debt for 50% of what was owed and received a clearance letter. The agent on the phone was unable to tell me what happens at the Credit Reporting Agency now, except for the fact that they [the collection agency] will report the settlement to the CRA.


That credit entry had reached the R9 status and i'm wondering what happens to it now, or once the settlement has been reported to the CRA?

- thanks in advance for any knowledge.
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For clarity you may want to type CRA in full so people don't misunderstand it as Canada Revenue Agency.

My understanding is that once reported to Equifax/Transunion you will now have collection item on your credit report reading as "Settled" and it will remain for 7 years. I have never worked for either company so I am not 100% sure, but this was my interpretation of how they function when I worked as a lender.
[OP]
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RolandCouch wrote:
Jul 9th, 2012 6:49 pm
For clarity you may want to type CRA in full so people don't misunderstand it as Canada Revenue Agency.

My understanding is that once reported to Equifax/Transunion you will now have collection item on your credit report reading as "Settled" and it will remain for 7 years. I have never worked for either company so I am not 100% sure, but this was my interpretation of how they function when I worked as a lender.
Thanks for that, edited.

I guess what im really wondering is: does it stay as an R9 for the remainder of the "debt clock" so to speak? or does it downgrade progressively?
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BennyBP wrote:
Jul 9th, 2012 6:42 pm
Hi all, title basically says it.

Just settled a debt for 50% of what was owed and received a clearance letter. The agent on the phone was unable to tell me what happens at the CRA now, except for the fact that they [the collection agency] will report the settlement to the CRA.

That credit entry had reached the R9 status and i'm wondering what happens to it now, or once the settlement has been reported to the CRA?

- thanks in advance for any knowledge.
The original creditor reports - R9 sent to collections
The collection agency will report - settled


The next time you apply for credit the credit analyst/underwriter will see the R9 tradeline. They will then look for a collection tradeline that corresponds to it and will see that its been settled and paid.
If you're thinking of seeking any credit products you may be better off waiting a year or two. Your chances of securing credit is better now than if the account was still outstanding with skipped notations
----------------------------Licensed Credit Bureau member, S1, FI Automotive, CCP forums most banned = x 13 and counting, guess who that is?... stomped to the curb once again
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BennyBP wrote:
Jul 9th, 2012 6:52 pm
Thanks for that, edited.

I guess what im really wondering is: does it stay as an R9 for the remainder of the "debt clock" so to speak? or does it downgrade progressively?
I'm not sure what you mean by 'downgrade progressively'? Like eventually it will show up as an R2? Or that eventually it will impact your credit less?

Again my understanding is that it will be converted from a standard R9 to a settled collection item which will slightly lessen the impact it has on your credit score. Over time, your score will gradually increase with good practices, the same as it would if it remained unpaid/R9. The difference is that your starting point (beacon score) for recovery should be increased by this settlement.


Edit: Mikeymike obviously writes with a bit more clarity on the subject and has probably seen cases like this more recently than what I have. What he wrote sounds 100% correct. (I also agree with him that just because it has been settled I would wait before seeking new credit).
[OP]
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mikeymike1 wrote:
Jul 9th, 2012 6:56 pm
The original creditor reports - R9 sent to collections
The collection agency will report - settled


The next time you apply for credit the credit analyst/underwriter will see the R9 tradeline. They will then look for a collection tradeline that corresponds to it and will see that its been settled and paid.
If you're thinking of seeking any credit products you may be better off waiting a year or two. Your chances of securing credit is better now than if the account was still outstanding with skipped notations
How I understand it now then is it will appear as "R9 - settled" or to that effect, until it is removed from my credit report after its 6-7 year clock has expired. (i've seen it quoted as 6 and 7 from various sources)

The last activity is from 2008, and with my understanding that debt settlement does not restart the time clock, it should 'fall off' my credit report some time in 2014-2015 then?

Thanks for the advice aswell. I'm going to take the secured credit card route for at least 12 months, at which time i'll pull my credit score/report and apply for a credit card to further my credit repair.

RolandCouch wrote:
Jul 9th, 2012 6:57 pm
I'm not sure what you mean by 'downgrade progressively'? Like eventually it will show up as an R2? Or that eventually it will impact your credit less?

Again my understanding is that it will be converted from a standard R9 to a settled collection item which will slightly lessen the impact it has on your credit score. Over time, your score will gradually increase with good practices, the same as it would if it remained unpaid/R9. The difference is that your starting point (beacon score) for recovery should be increased by this settlement.
Thanks, i think i understand now. What i meant was does it change to an R7 upon settlement and then to an R5 in a couple months etc. I guess my credit reporting ignorance is on display.
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BennyBP wrote:
Jul 9th, 2012 7:05 pm
How I understand it now then is it will appear as "R9 - settled" or to that effect, until it is removed from my credit report after its 6-7 year clock has expired. (i've seen it quoted as 6 and 7 from various sources)

The last activity is from 2008, and with my understanding that debt settlement does not restart the time clock, it should 'fall off' my credit report some time in 2014-2015 then?

Thanks for the advice aswell. I'm going to take the secured credit card route for at least 12 months, at which time i'll pull my credit score/report and apply for a credit card to further repair my credit repair.




Thanks, i think i understand now. What i meant was does it change to an R7 upon settlement and then to an R5 in a couple months etc. I guess my credit reporting ignorance is on display.
What Mikey said is right.

It will remain on your credit report as R9 just as it is now, but there will be a separate trade line on your credit report showing that this debt was settled. So while it will still be 'R9' it will read settled/paid, thus improving your credit score. The actual number R9 will not change to R7, R5, etc. over time. All the really matters is that the item was settled.

The positive thing in all of this is that if/when you do go and apply for new credit, the most important thing most lenders are usually told to consider is a person's character. If you can explain that you tried and tried and tried but simply did not have the ability to pay before, future creditors will at least respect the fact that after it was history and you had money again, that you did the right thing.
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RolandCouch wrote:
Jul 9th, 2012 7:10 pm
What Mikey said is right.

It will remain on your credit report as R9 just as it is now, but there will be a separate trade line on your credit report showing that this debt was settled. So while it will still be 'R9' it will read settled/paid, thus improving your credit score. The actual number R9 will not change to R7, R5, etc. over time. All the really matters is that the item was settled.

The positive thing in all of this is that if/when you do go and apply for new credit, the most important thing most lenders are usually told to consider is a person's character. If you can explain that you tried and tried and tried but simply did not have the ability to pay before, future creditors will at least respect the fact that after it was history and you had money again, that you did the right thing.
Just to clarify, having a R9/Collections item marked as settled or paid doesn't improve your score, however, it looks vastly better to any new credit granters that you paid/settled it.

bad news is your score will be in the toilet till the trade line and collections item age off, if you have any existing credit products don't cancel them, as it will be difficult to get unsecured credit for awhile.

If you don't have any credit cards etc, I'd look into getting 1 or 2 secured cards to re-build your credit history/score..

Nyd
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nyder74 wrote:
Jul 9th, 2012 7:37 pm
Just to clarify, having a R9/Collections item marked as settled or paid doesn't improve your score, however, it looks vastly better to any new credit granters that you paid/settled it.
Not saying you are wrong but just wondering if you have a source for this? I always thought it improved your score.
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RolandCouch wrote:
Jul 9th, 2012 8:00 pm
Not saying you are wrong but just wondering if you have a source for this? I always thought it improved your score.
I had an R9 go from a balance owing to marked as "PAID", score didn't budge 1 point.

An R9 is an R9, its not going anywhere for 6/7 years paid, settled or otherwise.

Nyd
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BennyBP wrote:
Jul 9th, 2012 6:42 pm
Hi all, title basically says it.

Just settled a debt for 50% of what was owed and received a clearance letter. The agent on the phone was unable to tell me what happens at the Credit Reporting Agency now, except for the fact that they [the collection agency] will report the settlement to the CRA.


That credit entry had reached the R9 status and i'm wondering what happens to it now, or once the settlement has been reported to the CRA?

- thanks in advance for any knowledge.
R9 will stay a R9 , it doesn't matter if you paid or not, Actually having it on your account regardless if it says PAID won't do nothing for your score, and most likely you still wouldn't be able to get credit. Gotta wait 6 years, though if your trying to get a loan and you speak with someone in person when they pull your file and it says paid they might be more lieniant but either way your still gonna get the *****est deal because of the bad credit.
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RolandCouch wrote:
Jul 9th, 2012 6:49 pm
For clarity you may want to type CRA in full so people don't misunderstand it as Canada Revenue Agency.

.
Canada Revenue Agency would consider the gain on debt settlement, ie., debt settled at a lesser amount, would be income to the debtor, to be reported on tax return.
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jedi1648 wrote:
Jul 10th, 2012 8:28 am
Canada Revenue Agency would consider the gain on debt settlement, ie., debt settled at a lesser amount, would be income to the debtor, to be reported on tax return.
This has nothing to do with what he was asking.
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BennyBP wrote:
Jul 9th, 2012 7:05 pm
The last activity is from 2008, and with my understanding that debt settlement does not restart the time clock, it should 'fall off' my credit report some time in 2014-2015 then?
Well, you just paid it, so the last activity is now: now!
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