Paid Charge-Off

[bigboihill]

Hi everyone!  I have a question about the updating of a paid charge-off.  I have a charge-off on my CR from Barclays for the amount of 2,304.61.  Barclays still owns the debt but I paid it  off in full through their collection agent ARS.  I paid it in 4/2012.  I received a letter from ARS the following day after I PIF stating that the debt has been paid in full and that they will notify Barclays Bank.  However, my credit report has not updated yet!  The CR still shows a charge-off in the full amount without the paid status.  

Here's the big concern for me.  Barclay's has not updated my CR since July of 2009!  I am afraid if I contact them to have it updated, it will ding my scores because it will look more recent.  The charge-off is not really hurting my scores right now because I am at 690+ on all of my "true" FICO scores.  Also, I have the letter stating that it has been paid in full (which I plan on providing to an underwriter when I mortgage app in December).  I want your expert opinions on whether I should just leave it alone or force the issue on an updated status.  Thanks!

[llecs]

Regardless of the score change, your lender probably will require you to show a $0 balance. It's also factoring into your DTI. If I had that I'd take the steps now to update it via a dispute (assuming the account is younger than your AAoA) or call Barclays. You can always GW them at the same time. Who knows. Maybe they'll delete some of the lates, CO reference, etc. There's a risk they might delete, which could help or hurt depending on its age. It could also be factoring into util, though without an update in 3 yrs that isn't as likely.

[bigboihill]

Thanks Illecs!  However, how do you know if it is factoring into my DTI?  It was not mentioned in my revolving debt when I did the FICO score simulator.  There was also no mention of the regular monthly payment on the tri-merge pull from the lender in June.

[llecs]

Pull all 3 CRs. If it shows a monthly payment of anything other than $0, AND assuming it reports a balance other than $0, then lenders will still factor it in. Are you going with the same lender? It might be worth it to go back to that lender, show him/her the CR(s) and ask him/her how they'd view that account.

[bigboihill]

Thanks llecs!  It is interesting but my tri-merge from June (Acranet) does not list monthly payments at all---for any of my accounts.  However, my pull from Wachovia last year does show the monthly payment from all of the accounts, even the charge-off.  I am going with the same lender so I will shoot my loan officer an email to find out what she thinks.

[bigboihill]

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@llecs wrote:

Regardless of the score change, your lender probably will require you to show a $0 balance. It's also factoring into your DTI. If I had that I'd take the steps now to update it via a dispute (assuming the account is younger than your AAoA) or call Barclays. You can always GW them at the same time. Who knows. Maybe they'll delete some of the lates, CO reference, etc. There's a risk they might delete, which could help or hurt depending on its age. It could also be factoring into util, though without an update in 3 yrs that isn't as likely.

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I have another question about the AAOA.  Equifax is showing my AAOA as four years.  This is probably due to my numerous student loans because my oldest account is about 16 years old.  If the Barclay's account which was opened in 2/07 was deleted (along with its Charge-off status), would the benefit of the charge-off deletion outweigh the ding to my AAOA if any?  Thanks!

[llecs]

AAoA is the avg. age of all OC accounts whether opened or closed, good or bad. It's a fairly significant component of FICO scoring. I've personally lost points just by removing old COs. What I look for is 1) whether or not AAoA drops (remember, FICO measures it in whole years), and 2) whether or not is is my oldest account overall or oldest revolving in this case, and 3) whether or not the baddie aspects will drop soon making repair a moot issue. I personally don't mind losing a few points in order to have a cleaner report. If it isn't the oldest and/or AAoA doesn't drop by more than a year (doesn't sounds like it if you have 16-yo accts), then I'd pursue repair via a GW or calling them or a dispute (since it is reporting incorrectly).

[RobertEG]

The OC has an obligation under FCRA 623(a)(2) to timely update any reported information so as to maintain the accuracy of their reporting.

Once a debt is paid, they are required to update the current balance to $0.

So there is no question that they are not in compliance.

The significance to the consumer is not in FICO scoring, but rather the fact that anyone doing a manual review of your CR will see an unpaid, delinquent debt.

That's a serious potential negative in any creditor evaluation, so it should be updated.

However, I would not recommend disputing, as it will put a dispute flag on your credit file/report, thus making your FICO scoring essentially useless until the dispute flag is removed.  I would send a simple letter to the creditor, reminding them of their obligation under section 623(a)(2) to provide timely update.

If you want to put a little beef in the letter, you might mention a possible complaint to the FTC if not timely corrected.

If that does not work, then maybe file a direct dispute with them, which often dont result in their reporting of a pending dispute flag to the CRA.

Update of current debt balance will not harm scoring or reset the mandatory CR exclusion date, which is based only on the DOFD on the OC account.