Pay off? Drop off?

[Anonymous]

My husband and I had lots of credit card debt in 2006/07 when interest rates shot up sky high. I had always paid more than the minimum payment and paid ahead of the due date. So I called and begged and pleaded for them to drop the interest rate since we were such good customers. Of course, that did no good. Then my husband got hurt and couldn’t work, and I lost my job. We struggled to make the payments for months but couldn’t even make the minimum amounts. Finally we gave up.

The only credit we have had since then is a Kohl’s acct, which I use regularly, and a Fingerhut acct that has been open for several years that we had not used until a few months ago. Since we are going to have to buy a vehicle in a year or so, we tried to get a cash-secured loan from our bank, and was turned down because we had so many bad accts. The woman said the two that were hurting us the worse was Discover and BOA because they kept advancing the date on the accts so it looked like they were recently delinquent, rather than old accts. She suggested that we at least try to pay off the Discover acct, so our credit would look better. But that acct was charged off in December 2016, and drops off in April 2018 and I am afraid that paying it will restart the clock. We have four other accts that will drop off this year (leaving 3 still on our credit report). Will that improve our credit score any, and if so, how much? And should we pay the Discover acct since it is already charged off?

[stargazer25]

The DOFD is based on the first time you were 30 days late. That is what the CRA's use to calculate when the baddie will fall off. Even if you do pay it off, that will not restart any clock. It will still fall off in April 2018.

Paying the Discover won't jump your scores but it will let them heal and start slowly going up. If you are going through a manual underwriting then paid charge offs look better than open charge offs.

Good luck and welcome.

[RobertEG]

Updated reporting does not "reset" the ultimate date that reported derogs must become excluded from your credit report.

However, updated reporting does, while the derogs remain, affect credit scoring, as FICO considers the updated reporting as a positive statement that the period of delinquency continues thru that date, which is effectively a reporting of a longer delinquency.

Paying will terminate updated reporting of extended delinquency, thus permiiting the derogs to begin to age in scoring effect.

Credit report exclusion is totally separate, and applies regardless of payment status.

A charge-off has a credit report exclusion date no later than 7 years plus 180 days from the reported DOFD, regardless of whether paid or unpaid.

If the CRA is indicating an expected exclusion date of 4/2018, that indicates a reported DOFD of approx. 4/2011.