Will paying on my charged off auto make a difference to my credit score?

[nickkinfl]

Hi. I need help in deciding what to do about a charged off auto loan that occured in August of 2015. I was having a hard time making payments and I tried everything including a part time job to be able to keep up with the payments but I decided to contact them to turn the car over. I was sent a 1099 form also for the amount of $10772.00. I am planning on filing a form 982  so that I don't have to pay taxes on that amount. I spoke with a representative at the credit union who stated that I could make payments on the account. They have never called me to actively pursue collecting on the account.

 It was the best decision for me because I am now able to save money and I have opened up a secured Amex with USAA, a secured mastercard card with 5/3 bank and an unsecured Capital One card under the credit builder program, so my scores are improving every month and I have hope for my financial future where before there was no hope at all. I do understand that the charge off had and will continue to have a huge impact on my credit scores for the next 7 years. My question is if I decided to pay on the loan, will my credit scores increase as the balance goes down or does it not matter at all in regards to my credit scores? I have been told that they can not do a PFD whether I make payments of pay in full all at one time, which I am not able to do without borrowing from my 401k and I am NOT doing that!  

[Anonymous]

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@nickkinfl wrote:

Hi. I need help in deciding what to do about a charged off auto loan that occured in August of 2015. I was having a hard time making payments and I tried everything including a part time job to be able to keep up with the payments but I decided to contact them to turn the car over. I was sent a 1099 form also for the amount of $10772.00. I am planning on filing a form 982  so that I don't have to pay taxes on that amount. I spoke with a representative at the credit union who stated that I could make payments on the account. They have never called me to actively pursue collecting on the account.

 It was the best decision for me because I am now able to save money and I have opened up a secured Amex with USAA, a secured mastercard card with 5/3 bank and an unsecured Capital One card under the credit builder program, so my scores are improving every month and I have hope for my financial future where before there was no hope at all. I do understand that the charge off had and will continue to have a huge impact on my credit scores for the next 7 years. My question is if I decided to pay on the loan, will my credit scores increase as the balance goes down or does it not matter at all in regards to my credit scores? I have been told that they can not do a PFD whether I make payments of pay in full all at one time, which I am not able to do without borrowing from my 401k and I am NOT doing that!  

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I would just wait and let it age, if they are not going to press you for it I would not worry about it. Paying it will not help scores at this point.

[nickkinfl]

Ok. Thanks!

[Anonymous]

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@nickkinfl wrote:

Hi. I need help in deciding what to do about a charged off auto loan that occured in August of 2015. I was having a hard time making payments and I tried everything including a part time job to be able to keep up with the payments but I decided to contact them to turn the car over. I was sent a 1099 form also for the amount of $10772.00. I am planning on filing a form 982  so that I don't have to pay taxes on that amount. I spoke with a representative at the credit union who stated that I could make payments on the account. They have never called me to actively pursue collecting on the account.

 It was the best decision for me because I am now able to save money and I have opened up a secured Amex with USAA, a secured mastercard card with 5/3 bank and an unsecured Capital One card under the credit builder program, so my scores are improving every month and I have hope for my financial future where before there was no hope at all. I do understand that the charge off had and will continue to have a huge impact on my credit scores for the next 7 years. My question is if I decided to pay on the loan, will my credit scores increase as the balance goes down or does it not matter at all in regards to my credit scores? I have been told that they can not do a PFD whether I make payments of pay in full all at one time, which I am not able to do without borrowing from my 401k and I am NOT doing that!  

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Please read my post: http://ficoforums.myfico.com/t5/Rebuilding-Your-Credit/Paying-a-6-year-old-charge-off/td-p/4469377

I think paying on any debt will help you in the long run no matter what. If it doesnt help your score it will def show other creditors your willingness to pay your debts which will give them confidence to possibly lend to you. If you dont pay, and because the CO is new you may not be extended further lines of credit to include graduating your secured cards or a CLI on the unsecured card for a long time. However do you really want to have a charge off on your report until 2022? 

I just found that I have a charge off from 2010 for over 2K and I am going to pay it off to get it removed. If you can pay roughly $210 per month for 48 months (4 Years or 2019) it will be removed if you can get the CU to agree on those conditions versus having it on your report until 2022 or 2023.

The choice is yours.

[nickkinfl]

Thank you for your response. I went all the way up to the EO and they will not remove it under any circumstances

. They are a very conservative credit union (MidFlorida) and they will not budge. I am leaning towards paying it off because I would like to get a house in the next 2-3 years. I just didn't know if it would have any affect on my credit scores by paying on it each month.

[Anonymous]

Im no expert on credit, however I think paying it off will give you a better chance at financing a home versus not paying at all. Im sure once you pay in full and speak to the EO at teh CU they will change their mind.

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@nickkinfl wrote:

Thank you for your response. I went all the way up to the EO and they will not remove it under any circumstances

. They are a very conservative credit union (MidFlorida) and they will not budge. I am leaning towards paying it off because I would like to get a house in the next 2-3 years. I just didn't know if it would have any affect on my credit scores by paying on it each month.

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[Anonymous]

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@nickkinfl wrote:

Thank you for your response. I went all the way up to the EO and they will not remove it under any circumstances

. They are a very conservative credit union (MidFlorida) and they will not budge. I am leaning towards paying it off because I would like to get a house in the next 2-3 years. I just didn't know if it would have any affect on my credit scores by paying on it each month.

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I would not consider making monthly payments on it. Toss that cash in the bank and build up your bank account instead, and in 2-3 years, make a lump sum settlement offer. Paying on it monthly could actually be more damaging to your scores because that will keep it updating each month.

[Anonymous]

I'm in the same boat. On Mon I called about an old Cap 1 charge off to find out what I could do to clear this up. I spoke to very nice lady at Cap 1 who advised me that I should have received a 1099-C in Mar 2015 regarding this account. I checked my 2014 taxes and in fact I did report the amount she said the 1099-C had listed. She advised me that Cap 1 was no longer pursuing payment on this account because a 1099 had been issued. She also said there could be no settlement offered. She did say if I was to pay on the account I would have to pay the full balance of about 1K either in lump sum or in payments. She said since there is no payment due or a due date I was to pay whenever I wanted. She never asked for payment, only gave me options. She also mentioned that if the balance is ever paid in full that I could call back 22 days after last payment posted and request a letter stating paid in full. Maybe it's the 1099-C that throws a wrench into the whole situation. I'm still undecided on how to move forward with this as well. That is my 2 cents. Good luck.

[Anonymous]

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@Anonymous wrote:
I'm in the same boat. On Mon I called about an old Cap 1 charge off to find out what I could do to clear this up. I spoke to very nice lady at Cap 1 who advised me that I should have received a 1099-C in Mar 2015 regarding this account. I checked my 2014 taxes and in fact I did report the amount she said the 1099-C had listed. She advised me that Cap 1 was no longer pursuing payment on this account because a 1099 had been issued. She also said there could be no settlement offered. She did say if I was to pay on the account I would have to pay the full balance of about 1K either in lump sum or in payments. She said since there is no payment due or a due date I was to pay whenever I wanted. She never asked for payment, only gave me options. She also mentioned that if the balance is ever paid in full that I could call back 22 days after last payment posted and request a letter stating paid in full. Maybe it's the 1099-C that throws a wrench into the whole situation. I'm still undecided on how to move forward with this as well. That is my 2 cents. Good luck.

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It really depends on your short and long term goals as to whether you should pay or not. I can wait another year and 3 months and my CO will fall off however I do not wnat to wait a year and since its a debt that I owe, I will do teh right thing and pay it off. Not only will this reflect positively on mt CR, the creditors i am currently with will see me as being more credit worthy in the longterm.

I was also advised by DFAS that I wasnt required to pay, and after I paid the account it did not become current. Its still dated Aug 2010 but showing a lesser balance. DFAS has reported this CO on my CR since Aug 2010 every single month.

[Anonymous]

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@Anonymous wrote:

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@Anonymous wrote:
I'm in the same boat. On Mon I called about an old Cap 1 charge off to find out what I could do to clear this up. I spoke to very nice lady at Cap 1 who advised me that I should have received a 1099-C in Mar 2015 regarding this account. I checked my 2014 taxes and in fact I did report the amount she said the 1099-C had listed. She advised me that Cap 1 was no longer pursuing payment on this account because a 1099 had been issued. She also said there could be no settlement offered. She did say if I was to pay on the account I would have to pay the full balance of about 1K either in lump sum or in payments. She said since there is no payment due or a due date I was to pay whenever I wanted. She never asked for payment, only gave me options. She also mentioned that if the balance is ever paid in full that I could call back 22 days after last payment posted and request a letter stating paid in full. Maybe it's the 1099-C that throws a wrench into the whole situation. I'm still undecided on how to move forward with this as well. That is my 2 cents. Good luck.

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It really depends on your short and long term goals as to whether you should pay or not. I can wait another year and 3 months and my CO will fall off however I do not wnat to wait a year and since its a debt that I owe, I will do teh right thing and pay it off. Not only will this reflect positively on mt CR, the creditors i am currently with will see me as being more credit worthy in the longterm.

I was also advised by DFAS that I wasnt required to pay, and after I paid the account it did not become current. Its still dated Aug 2010 but showing a lesser balance. DFAS has reported this CO on my CR since Aug 2010 every single month.

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Thats what I meant by "monthly updating". The OP would not be seeing monthly updates since the OC has given up pursuit of the debt via the 1099C. I'm not saying he should NOT make good on the debt - just that he would probably be better off saving up and doing a lump sum settlement/PIF, rather than monthly payments.