Private Student Loan Charge Off Showing Balance

[esb111]

I currently have a private student loan that was charged off by citibak with a balance of ~16k about 1.5 yrs ago. The debt has not been sold to a collection agency, but I'm assuming the debt collector is a 3rd party acting on behalf of citibank. After speaking with a loan officer about an FHA loan, he suggested that paying the charge off or settling to remove the balance on my credit report will positively affect my credit score. Will settling this or paying in full help increase my credit score? I'm not sure the next best course of action.

[esb111]

A little more information I discovered. I pulled my 3 fico scores on here and reviewed the associated reports. The experian and equifax reports both show 90 day late payments - each month- from the date the account was charged off. Transunion does not show any late payments. I first spoke with the debt collector in Sep 2012 and set up a payment plan for the following 12 months. These payments were direct debited for 12 months, however, following this period a different debt collection company contacted me and I have not since set up a payment plan or anything of the like. During this time period, Sep 2012-Sep 2013, Experian and Equifax show the account was still 90 days late as well as charged off. Can this be disputed, since I was making payments toward the charged off balance? Please let me know, I am new to this and trying to rebuild my credit and could use any guidance/assitance.

[RobertEG]

A charge-off is the taking of an internal accounting measure, wherein the creditor can move a seriously delinquent debt out of their receivalbe assets, and write the debt off with the IRS.  It is based on their determination, at that point in time, the the consumer is not likely to pay the debt.

Taking a CO does not have any effect on the consumer's continued obligation for the entire debt, or the continued accrual of delinquencies on the unpaid debt.

It remains in a delinquency status at some level until the entire delinquency has been satisfied.

Many creditors will discontinue reporting of new or increased levels of delinquency after reporting a CO, but it is not improper to do so.

Paying the debt wont result in deletion of the charge-off, and thus it wont improve your score. 

You dont "pay off a charge-off," you pay the debt that just so happens to have been charged-off by the creditor.

You could offer the creditor payment in exchange for deletion of the reported CO, which if they accept would remove it from your scoring.

In most loan approval processes, payment of delinquent debt is often a requirement of a lendor, aside from any scoring aspects.

Are they requiring satisfaction of the debt a a pre-condition for any approval?

[esb111]

Thank you for the reply, I appreciate the information. At the moment they are focusing on bringing up my score and have not mentioned anything regarding the satisfaction of the debt. The suggestion was to pay the CO which may positively impact my score because it would remove the balance shown. I wondered if a PFD would be an option, but was told that this would only be an option with a CA not the OC.