Advice regarding 2 Charge-Off Accounts

[Anonymous]

Hi all,

I'm a newbie to the forum. I've found a lot of helpful information reading through the forum threads this morning and I thought I'd ask for a little advice. My situation is that I ran into some financial problems a few years back and had to let 2 credit cards slide. These accounts have since been charged off and are now with 2 separate collection agencies. I only receive calls/letters from one of the CA's (they handle just 1 of the accounts). The accounts show the Date of Last Activity as 6/2004 and 1/2005. I am in NC so the SOL on these accounts in 3 years so I believe I am still liable to be sued for the balance of both accounts...even though I've not received anything along these lines as of yet.

I know these 2 accounts are damaging to my credit (even though I have other currently open accounts that are in perfect standing and all other accounts in my history are perfect as well) but are they worth trying to resolve? This is not the best time as I am losing my job (after 8 years) as a result of company downsizing at the end of this month. The good news is that I am getting a pretty decent severance package. Assuming I can land a new job in the next few months, I was debating trying to use some of my severance package money to resolve these charge off accounts by negotiating a payoff. The balances for each are around $8K (total of about $16K) so unless they will take less than $5K for both ($2500 each), I probably can only afford to take care of 1 account. I can work on the other account down the road once I get back on my feet and get some money saved up. Reading through these forums this morning, it seems it may not be worth it to try and settle these collection accounts as it may actually hurt my score. Did I read some of the info on here correctly?

Is it worth it? How much will this help get my credit going back in the right direction? I just pulled my score and I'm at 580 which isn't the worst but still pretty terrible. I do have 2 open small limit ($300) revolving credit cards that currently have balances around $275 but I am going to pay them off in full next month so I'm thinking that will help raise my score a little.

Also...on another note....I just noticed that I also have a negative entry for an apartment complex I used to live in. Basically my girlfriend was being verbally assaulted by our neighbors and we bolted early on our lease....before it turned into anything worse. There was only a month or so left on our lease and I told the office and they said it would be find and they could probably rent it our early and we'd be fine. My mistake (and stupidity) for not getting this in writing but after we moved out they sent me a bill for all these "early move-out" penalties and such.
Basically I paid a full 12 months of rent but our move-in special was a $50/month rental discount coupon. The lease said if you broke your lease (which we technically didn't b/c I paid 12 months of rent...we just moved out early), you'd be responsible to reimburse them for all these amounts....plus penalties.

How long can this remain on my credit report? This happened back in 2001 and was not on my report for a few years but popped back up in the past year. The date of 1st deliquency is listed as 6/2001 (we moved out in May 2001 if I remember correctly) but the "status date" is listed as 8/2006. It says the "date assigned" is 8/2001 and its only been with 1 (the same) CA the whole time. I have not heard anything from the apartment complex or any CA since 2001 (maybe early 2002 at the latest). We bickered back and forth for several months but nothing was ever resolved. Basically I paid them a full 12 months of rent (and they kept my security deposit) so I don't think they had any grounds to try and collect the penalties mentioned above. Even though I wasn't there, I satisfied all 12 months payments of my 12 month lease so I don't see any way they can charge me the penalties....and they never gave me any answer to why they felt they could. Will this drop off at any point? Should I try to dispute it with the Credit Reporting Agencies to try and get it removed? Its been 6 years now....the balance is about $900 or so by the way.

Sorry for the VERY long post....Thanks in advance for the help!

[Anonymous]

I forgot to mention that although I am getting phone calls and mail from collection agencies (well really just 1 pertaining to the 1 account), these accounts are reporting under "Negative Account History" on my credit report (but not under "Collections") under the original creditors still (Chase and Citibank). There are no entries currently on my credit report for the Collections Agencies these accounts are apparently assigned to.

[Anonymous]

1) It's usually worth trying to resolve negatives. How much trying depends on how much energy you care to put into it. With no energy, it'll fall off eventually. While you can theoretically be sued, if your credit is fairly thrashed and they don't think you have resources and it's not a lot of $, generally you won't be. The threshhold differs for each company, though.

2) Settling or paying negatives in full may hurt your score. Those amounts are in the range where you probably will be sued on one or the other, and a judgment will hurt more and for longer than trying to settle will.

3) I started 100 points lower than you, so there is hope. If those are credit cards that are charged off, you probably won't get a score increase from paying down your current cards, because you're utilization is still over 100% either way (because of the charged-off cards being overlimit).

4) It can remain on your report seven years from the date of first delinquency, so sometime in 2008.

[Anonymous]

Thanks very much for the detailed response.

I'm really torn on what I should do. My credit is already trashed so I'm wondering if its worth trying to settle those negatives. On the other hand, I certainly don't want to be sued so I'm not sure what to do.

Can you guys recommend any resources for working with CA's on a payoff settlement? On 1 account, the credit limit is $6100 but my balance is almost $8300 so $2000+ of said balance due is late/overlimit fees. I'm sure that number is much higher if I went back at looked at the records. The other account has a similar balance but no credit line listed...I'm thinking it is about the same situation as the other. Where should I start in trying to negotiate a payoff.....as far as a number? Is there a certain formula to try and follow?

1 more question....is there a SOL on how long a creditor/CA can keep charging late penalties? Can they just keep hitting my accounts with them every month? Also, any ideas why these accounts still report under the original creditors (Chase and Citibank) but are in CA's that aren't reference anywhere on my credit report?

Thanks again for all the help...I really appreciate it. I know I screwed myself up bad but I'm actively working on trying to improve things the best I can in the next 1-2 years. We'd like to possibly move into a house and maybe have a child after that timeframe and I have to make the most improvements I can.

[Anonymous]

If it hasn't yet gone to collections, I would definitely try to negotiate the newer debt out with the creditor. You might be able to get it reactivated, or at least close it out under less derogatory terms. It's worth a lot to keep something from formally going into collections, because original creditors are almost always easier to deal with than collection agencies.

[yoreljm]

From what I've read, paying an old chargeoff temporarily decreases your score because in a sense it dredges up an old dormant, but delinquent account. I think using an old credit card that has been inactive for a long time may have the same effect of temporarily lowering your score. But it makes sense that paying off your bills (and chargeoffs) will help in the long run. I say that because whenever i'm declined for a credit card they always say I got declined because I have a chargeoff. So, I assume that paying off the chargeoff, even if it lowers my score will be better when I seek credit.

In my case, I was going to let the charge off fall of my account, but after 4 years, I just settled it and they agreed to report it as "paid in full" even though I only paid 1/2. I'm just going to wait a couple months and see what happens to my credit. I also took out a secured loan at my credit union, and that will also decrease my score a little at first, but as I pay, it will increase my score.

In summary, it seems every sudden change (e.g. using inactive account, getting new credit, paying chargeoffs) decreases your score. But paying on time for months and years will inprove your score. Remember that you are in this for the long haul! years!