@Sunshinebiz wrote:Hello all! Just wanted to get some lively discussion on this topic and have a place to share my updates as they occur.
On these boards it is very common to advise people that paying a CO will have no impact on their score and that its not always a prudent practice. Because techincally in the fico scoring model it may be that a paid CO and an unpaid CO are scored pretty much the same.
This may technically be true but I don't believe that it tells the whole story. As an individual account in one snapshot in time, that may be true that they are scored the same, but say for example you owe 1200 dollars on a charged off credit card: by paying this off you change the status from 1200 dollars owed and past due to 0 dollars and owed and paid in full. This can have a huge impact on your score with regards to your UTI %, your total bligations, your "currently past due" accts, etc. CO accounts are only included in util if they report both a balance and the CL, if the CL is missing they do not enter into util calcs.
This is evidenced by the fact that I have had a payment plan set up for an olf BOA card that unfotunately went CO some years back. I started with a balance over 8K and ended up owing about 1100 and change before finally just paying it off. Each month when my payment of 58 dollars posted I would get a notification from Myfico credit monitoring and it would not only refelt the balance change but I would very often (read: every other month ot so) see an increase of 5-9 points on my EQ Fico score.
This is probably much more impactful when dealing with any credit situation that involves a manual review of your report (think any recon situation with any creditor, any CU eval pretty much and any mortgage application). To these people looking at your credit I believe it not only shows a responsibility on your part to pay your past debts in full but it also shows, if unpaid, that you have an obligation and credit used, both of which come in to great account when decisions are being made by these people.
So my conclusion is that it's always best to pay your debts in full, both past and present. It may not technically make a difference when fico scoring to change a CO from unpaid to paid, I do believe it ultimately does make a positive impact on your score, it makes a huge impact on your manual review, and its ultimately the correct and responsible thing to do, although it does cost more $$ than settling or waiting out the DOFD period. In accounts that are past states SOL one would negotiate for less than what is owed and if they are Zombies they can most likely be settled for very little on the dollar. Yes manual review is where you get the most in having satisfied accounts over unpaid accounts.
I just wanted to get everyone's feedback and thoughts on this subject in one spot and in fresh perspective. Also wanted to share some updates that I have had and will have in the coming weeks. Thanks for looking everyone and thanks as always for the invaluable advice
