Negotiating Debt With American Express - How Will It Impact My Credit?

Reader Question: How will negotiating with American Express for anything less than the full balance impact my credit score?

It will probably hurt your score. Anytime you agree to some kind of settlement with a creditor, in which you pay less than the full amount owed, the creditor will write off the difference and report it to the credit reporting agencies. It would show up on your credit report as a closed account, with a note to the effect of "settled for less than amount owed." At least, that's what happens in most cases.

It won't hurt your credit score as much as walking away from the debt entirely, but it will certainly have a negative impact to some degree.

I did a search and found a similar question that was asked back in November of 2008. Like you, this person was considering a settlement of some kind with the credit card company. Here's the response I posted:

Credit Card Debt Settlement - How It Affects Your Score

In the Q&A session above, I explained that the best-case scenario is to pay the full balance in some way, shape or form. The second-best scenario is debt settlement, which will do damage to your credit score. The worst option would be to ignore the problem and have it sent to a collection agency.

If you are learning toward a credit card debt settlement, you need to do some more research into the subject (beyond this blog). Read everything you can find about settling debt in this fashion, so that you can make an educated decision.

Hope that helps.