Understanding FICO® Scoring

[Articulate1]

Is it true that removing a paid charge off from your credit report could lower your score?  What situations could make this true or false.  When the account is paid how could it be a charge off?

[Barry]

Articulate1,

While in some rare cases, a score can go down after negative information is removed, it doesn't happen all the frequently.  This can happen because the weight the FICO scoring formula applies to certain items is dependent on other factors within the report, such as length of credit history, size of the credit file, the presence/absence of late payments, and others.  For example, the effect of a max'd out credit card account will vary up or down depending on whether or not there are any accounts with seriously late payments on the report.  So, in this example, and again only in rare occasions as there are other factors at play here, you could possibly get more points for that max'd out credit card WITH the charge off than without the charge off.  Again, this is rare, but you asked....

And to answer your question about "When the account is paid how could it be a charge off?", the debt is "charged off" as a loss after going delinquent a certain number of months.  Then if it gets paid AFTER being charged off, it's indicated as a "paid charge off."

Barry

[TheNewWorldMan]

And remember too that the FICO system doesn't give a rip whether you pay a chargeoff or not...it will still count against you just as much. The system is great at meticulously counting EVERY negative while studiously ignoring anything positive that you do.

[Skiffy]

Au contraire, FICO scoring may reward you for paying a charge-off. It doesn't necessarily, though, it does depend.

I think what the prior poster meant was "how can something paid still be a charge-off" (since a charge-off is an unpaid loss).

There is a code for "Paid account/was a charge-off," and a tradeline is supposed to be updated to that status that when it's paid.

When my I paid a small outstanding charge-off, its status was instead changed to: "Paid,Closed/Account charged off. $XXX written off." Not correct. Still arguing over it. I don't know that that's affecting my FICO for certain, but it is considered a recent derogatory (and I have had adverse action as a result).

[TheNewWorldMan]

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Skiffy wrote:
Au contraire, FICO scoring may reward you for paying a charge-off. It doesn't necessarily, though, it does depend.

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Depends on what?  So far, my experience with FICO has been a worst-case scenario, so if there's a 95% chance it would improve my score and a 5% chance it wouldn't, I'll assume it won't unless I hear some darn good evidence to the contrary.

[MercyMe]

I hate to trouble you, Barry, but if you could please, tell me how many times a charged off accout can be updated and by whom -- the CRA or the Credit provider, and what might cause a paid and closed account to continue to show current activity, for as long as three years after the paid and closed date?   This has been the case with an unsecured home improvement loan of $10,000 taken out 20 years ago, that became an $862 charge off in 2002, but which was paid in full in 2003/4.  On both my Equifax and Fico reports the same account shows current acitivity (paid on time, every month), for near three years, but for  three COs scattered about in the same three years, on the 180 month payment history, though this same account and on both reports shows Paid Charge Off.  This has been wreaking havoc with my credit score!  What happened, and how can it be fixed?  Thanks for your time and thank you, MyFico, for this forum!