whether or not i should pay off my debt

[ektorp]

so here's my situation. until recently i have always been a financially responsible person with no late payments or account defaults in over 10 years. i had a credit score in the low to mid 700's. however, due to the real estate collapse, i was behind several mortgage payments and recently sold my property in a short sale and my credit score dropped to the low 600's. i have about $25,000 in credit card and about $25,000 in savings. i was initially thinking about taking my savings and paying off my debt in full and be debt free. i am now being advised to settle my debt for about 20% of what i owe. this would cause my credit score to drop but it is already low because of my short sale. does it make sense to pay off $25,000 in debt and still have a low credit score or settle the debt, have a lower credit score but have about $20,000 in savings? any advice would be greatly appreciated.

[Credit Expert]

That's a good question. It really depends on your intention to use your credit in the near future. If you have plans to purchase another home, vehicle or need a job or insurance that requires good credit, you may want to consider just paying the 25k off in full. The short sale is considered a settlement and is definitely hurting your credit but if that is the only item, your other positive accounts can counteract that one negative account and you can still salvage your scores by simply paying off your debt. You can also use a service like mine ( http://www.CreditAgenda.com ) to help you remove the settled mortgage/shortsale and/or late payments to optimize your reports.

If your immediate need for credit is not there, you may be able to settle your debts for less then you owe but dont expect to get 20% settlements across the board. You need to be seriously delinquent on your credit cards in order to settle during which time your incurring late/overlimit fees and excessive interest which can inflate those debts. Also, there is no guarantee they will settle. If you hire a debt settlement company, chances are they may be able to settle for around 40%-50% of what you owe and then of course they have a fee that usually ranges from 8-15% of your total debt. There are many pros/cons to both of your options. I recommend you call me to discuss your situation and possibly review your credit reports to be able to provide better advice. If not, simply look at your priorities and determine which options will affect your chances of accomplishing your goals.

Hope the info helped.