CA Account - to pay or not to pay?

[Anonymous]

Long story short - I have a collection account (auto loan) that I called about and wanted to pay off - was a huge back and forth dispute for years. It's about $800 today. I was told they would remove the collection if paid in full, but it would still show all of the late payments - there are about 15 of them. My EQ score is 670 right now - so I'm not sure that paying off the account is worth it given all of the late pays will still show? Other than my debt to available credit this is the only bad thing on my report so I'd like to make the smartest moves possible with my available cash. Thoughts anyone??

[MidnightVoice]

If I owed someone money and I could pay it off I would - the right thing to do.

[llecs]

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@Anonymous wrote:

I was told they would remove the collection if paid in full, but it would still show all of the late payments - there are about 15 of them.

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You can't remove a collection and still show lates. Either they remove it or they don't.

I would mail them a PFD. I wouldn't negotiate over the phone.

[Anonymous]

You're right - it's not a collection account, it's a charge off. It's the original lender and my report says that it was "charged off as bad debt" and still shows a balance. So even if I pay the balance it'll show all of the lates, but they'll remove the charge off part. Not sure if that's better or worse? Either option is crummy so I'm going to take your suggestion and send a letter and hopefully get things moving forward

[AndySoCal]

I would ask what they are going to change it to? from Charge off to ????  Secondly what time frame are the late payments? IE what year and month

[Anonymous]

Good point - I'm not sure what they would change the status to. BTW speaking on the phone with them was NO help at all so a letter is by far the best route. The late payments were reported starting in Jan 2007 and rolled forward from there for the entire year of 2007. It was a balance that kept rolling forward so as I made regular monthly payments the old piece was snowballing. Essentially I had an auto lease and moved from NJ to FL - in NJ I had prepaid the sales tax at lease inception, when I moved to FL they started assessing tax on TOP of my payment. So while I finally was able to get that piece settled with them after a long period of time they refused to waive any of the late fees that had accumulated, etc.

So while I would like to just have this settled I don't know how much my score will be helped by just having the charge off removed and none of the late pays, etc.

[RobertEG]

Be careful about what they will tell you will be updated.

A charged-off account will show under Current Account Status, Payment History Profile, and a field code called "Payment Rating."

Current Status does not record any prior status of delinquencies or derogs. Current Status is ONLY the last status reported.  Payment Rating records the status prior to the Current Status.  And Payment History Profile retains each prior monthly delinquency or derog reported, by date.

For a charge-off it would work like this.  When an account has a Current Status of charge-off, the Payment Rating will additionally show the status prior to the change to the Current Status to charge-off.  For example, an account that was 120-days late at the time of the charge-off will retain the 120-day late prior status under the Payment Rating.

If the account is then paid, the Current Status would simply report "paid."  The Payment Rating would then update to show the status just prior to payment, which in this case would report "charge-off."  The Payment History Profile would retain, by month, the 120-day late, the charge-off, and the paid status, each under different months.

When FICO scores the CR, it will score each of the prior derogs and delinquencies, regardless of Current Status.  FICO does not score the payment status of an account.

They may have simply been telling you that, upon payment of the CO, the Current Status will no longer show as a CO, but that is required, and alone does not remove FICO scoring of the CO, which is still in your credit file under both the Payment Rating and Payment History Profile.  Or they may be telling you that your Payment Rating field will also be updated to remove the prior status of charge-off.  In that case, it is unsure what they will update for the Payment Rating.  Technically, it would revert to the prior status of 120-days late prior to the charge-off.  And of course, FICO will look at your monthly Payment History Profile, so if the CO still shows there, it would still affect your scoring.  They usually dont tell you the whole story when they refer to deletion or update.

The only way to ensure total removal of the effect of the CO is for them to delete the entire account, or to update the Payment History Profile, Current Status, and Payment Rating to all delete reporting of the CO.  From what they have told you, I am unsure of what they plan to update in your credit file based upon your payment.

[AndySoCal]

If you can negociate it to show in paid not paid charge off or paid collection do not worry about the lates for payment in full I would take it. Some would disagree here is my logic.  The charge off status on the account is more recent than the lates. By doing what I suggested this would put the derogatroy information on this account furthur back in time.  This might have a positive effect on our score it might not and it would accomplish the other objective by getting this account settled. The lates dates will still have an effect on your score but as time passes they will have a lesser effect. I would also get the arrangement agrred to in writing. It is not a perfect solution but I doubt if they will agree to remove the reporting of the account AKA pay for delete. The decision is yours of course.