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    HessA's Avatar
    HessA Posts: 3, Reputation: 1
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    #1

    Sep 10, 2007, 03:21 PM
    How does a 1099c affect my credit?
    If I work out a settlement amount with a credit card company and they issue me a 1099c on the difference, how does this negatively affect my credit?
    ebaines's Avatar
    ebaines Posts: 12,132, Reputation: 1307
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    #2

    Sep 11, 2007, 01:11 PM
    A 1099-C is a "Cancellation of Debt" form that states that you have income attributed to the forgiveness of the debt. For example, if you owe $1000, and the company settles with you for only $750, then the extra $250 is considered income to you. The company sends you the 1099-C to document this. They also send a copy to the IRS, so you will have to report this on your income taxes as "Other Income" on your Form 1040, and pay Uncle Sam his due.

    The 1099-C by itself does nothing to your credit rating; however, the company who settled with you is sure to let the credit reporting agencies know about what happened.
    HessA's Avatar
    HessA Posts: 3, Reputation: 1
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    #3

    Sep 17, 2007, 01:51 PM
    Quote Originally Posted by HessA
    If I work out a settlement amount with a credit card company and they issue me a 1099c on the difference, how does this negatively affect my credit?
    So why do they report it to the credit reporting agencies if it has no affect on my credit rating? The credit card company told me that it would negatively affect me, but I didn't know if that was a line they were just feeding me or not.
    ebaines's Avatar
    ebaines Posts: 12,132, Reputation: 1307
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    #4

    Sep 17, 2007, 02:13 PM
    They report it to the credit agencies because you failed to pay what was owed, and consequently you are considered a worse credit risk than other customers who pay their full bill.
    HessA's Avatar
    HessA Posts: 3, Reputation: 1
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    #5

    Sep 20, 2007, 03:18 PM
    So in your opinion, is is better to suck it up and pay the full amount on the credit card balance, or pay a good deal less to the credit card company and then deal with it being reported to the credit agencies?
    Fr_Chuck's Avatar
    Fr_Chuck Posts: 81,303, Reputation: 7692
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    #6

    Sep 20, 2007, 06:56 PM
    It is better to work out the deal in writing, where you pay less amount, but they report it as paid not paying less than full or settlement.

    The actual 1099 has nothing to do with your credit report it is a IRS thing,
    It is the report they file with the credit bureau that effects your credit.
    ScottGem's Avatar
    ScottGem Posts: 64,966, Reputation: 6056
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    #7

    Sep 20, 2007, 07:19 PM
    What affected your credit was a report that you paid less than the amount owed as part of a settlement. The 1009C was just the mechanism for that reporting.
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