Collections Account and FICO Score Simulator

[binary10essee]

I have a store credit card that went into collections due to poor circumstances last year. It was either pay $408 or pay my rent after I was laid off from my job. I lived in that home for 2 1/2 months while I looked for a job, and because of that, I couldn't pay the credit card balance. I attempted to return the merchandise, as my first payment hadn't quite come due yet, and they *refused*. They told me I could "voluntarily surrender" it and still be responsible for the balance.

I checked the myFICO Score Simulator. My FICO score is currently a 490. It said that if I pay my revolving/open account balances of $408 at $17/mo. for 24 months that my score would go from 490 to 605. However, since the account is in collections, how would paying the balance improve my score? I thought collections accounts don't impact your score if you pay them off?

[guykara]

I wouldn't go by that FICO score simulator. I have a high utilization rate right now, and the FICO score simulator tells me there would be no change to my score if I lower it to the 1-9% range, which I know is wrong.

Since it's in collects, your main goal should be getting it removed. If you're able to pay the $408, offer a PFD to the CA.

Good luck.

[binary10essee]

Right, that makes sense. That's exactly why I posted here, because I know it doesn't replace a human evaluation of any kind. However, I cannot afford to pay the balance in full. I can really only pay a little at a time, but even then, I don't know that they'd agree to remove the account, since it's been in collections for several months.

[guykara]

You could always try and offer half of the amount in a PFD. Or you could settle for less with the CA, and then send a good will letter once it's been settled and ask for forgiveness / deletion.

[madmann26]

So here is what's going to happen.

First off, that CC is charged-off. What does that REALLY mean? The CC company has written that amount off its books as a loss, meaning, any amount you pay now, is profit for them again.

Secondly, if they are open to it, offer a PFD to the OC. This way, you pay the account in full and have the account removed at the same time. (not a lot of success with this)

Third, the CO balance is being factored into your FICO score thus dragging your score down more.

Fourth, PFD with the CA if #2 doesn't work. This way, you pay the CA, they delete their account and report to the OC that you have paid and the OC will change the balance to $0. This will bring your score up some.

If this CA is the only CA on your report, there should be substantial points gained once the CA is deleted. You'll get a few more points once the OC updates the balance to $0.

[CreditGuy03]

The FICO simulator is purposefully wrong so that people cannot reverse engineer the FICO formula using it. It is useless for anything

[binary10essee]

Upon looking further into the situation, it appears that the store credit card is not actually in collections, but I could be wrong. I'm no expert when it comes to credit. The original creditor still has the account in their name. However, it's marked as "Closed". When I call their customer service line and check the balance, they say it's still $408. And it's actually listed as "Charged Off", as you mentioned. So do you think paying it off would actually help?

[madmann26]

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@binary10essee wrote:

Upon looking further into the situation, it appears that the store credit card is not actually in collections, but I could be wrong. I'm no expert when it comes to credit. The original creditor still has the account in their name. However, it's marked as "Closed". When I call their customer service line and check the balance, they say it's still $408. And it's actually listed as "Charged Off", as you mentioned. So do you think paying it off would actually help?

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Yes,

Paying it will help. How much? YMMV.

[binary10essee]

The current balance is $408. If paying it will help, I'll set up payments ASAP.