New Member
chadwicks
Posts: 5
Registered: ‎01-15-2009
will paying off a charge off improve score?

My spouse has a Merrick Bank credit card account that charged off. It was on a hardship plan and somehow we missed a payment so they c/o. Anyway now we are paying Cardworks Servicing $28 a month for 36 months to settle the account. We're about a year into it. They continue to send offers to lump sum settle. My question is if we were to take a lump sum settlement and be done with it would that improve the score at all? Its currently reporting as charged off by Merrick with the current balance. Cardworks is not reporting. They say that once the account has been settled Merrick will report it as settled.

Established Contributor
bettercreditguy1
Posts: 760
Registered: ‎02-11-2012
Re: will paying off a charge off improve score?

Settled for less than owed will have a longer negative effect on your fico score than paying in full.

Starting scores 01/02/2012 EQ 707(Fico) TU 733(Fico) EXP 735 (FAKO)
Updated scores 06/01/2014 EQ 797(Fico) TU 768(Fico) EXP 769 (Fico), EQ 849 (Next Gen 5/27/14 Penfed)


Remember the Three P's: Pay early in Full, Pay on Time, Patience
New Member
chadwicks
Posts: 5
Registered: ‎01-15-2009
Re: will paying off a charge off improve score?

Yes, I understand that thanks. I should have been more clear. My question is would settled for less be less damaging then a charge off (which is what is reporting now)?

Regular Contributor
ApexdvToo
Posts: 232
Registered: ‎06-01-2012
Re: will paying off a charge off improve score?
[ Edited ]

My understanding is: the CO is a major derogatory and is weighted the same by FICO whether it is PIF or not.  However, a settlement is viewed as a negative - still, no diff in FICO scoring.   I also understand that FICO basically uses the "CO" for scoring and does not refer to Bal/PIF/Settlement -- a more experienced could verify, please.  Where it really comes into play is when a creditor manually reviews; the settlement would be more negative than a PIF.  It would be weighted as: CO: PIF, CO: with bal, CO: settlement with settlement being the worse.

 

I would suggest paying in full or if you can do it, a PFD.  If the PFD is not accepted I would PIF (whether via payments or lump sum) the GW then heck out of it for a removal of the CO and/or Tradeline.


Starting Score 4/15/2012:579 Ex-FAKO, 572 Eq-FAKO, 546 TU-FAKO (all were sub-500 in 2011)
FICO as of 3/08/2013: 627 EQ, 647 TU
FAKO as of 3/23/2013: 638 EX, 652 EQ, 648 TU
Goal 1: 600 FICO achieved 10/2012!, Goal 2: 650 FICO Across the Board - Let's take Baby-Steps!
**Amex Optima $1.3k, GE/CareCredit $1k, CapOne Secured $900, Barclaycard Rewards $500, CapOne Rewards $500, Citi/Shell $200**
Seedling Garden Club Member - Last App: 03/18/2013 - Goal: No apps for One Year: 3/18/2014
Moderator Emeritus
MarineVietVet
Posts: 14,577
Registered: ‎07-14-2009
Re: will paying off a charge off improve score?

chadwicks wrote:

Yes, I understand that thanks. I should have been more clear. My question is would settled for less be less damaging then a charge off (which is what is reporting now)?


Any notation of "settled" is scored the same as a charge off.

Valued Member
algorithmslave
Posts: 68
Registered: ‎09-10-2012
Re: will paying off a charge off improve score?

ApexdvToo wrote:

My understanding is: the CO is a major derogatory and is weighted the same by FICO whether it is PIF or not.  However, a settlement is viewed as a negative - still, no diff in FICO scoring.   I also understand that FICO basically uses the "CO" for scoring and does not refer to Bal/PIF/Settlement -- a more experienced could verify, please.  Where it really comes into play is when a creditor manually reviews; the settlement would be more negative than a PIF.  It would be weighted as: CO: PIF, CO: with bal, CO: settlement with settlement being the worse.

 

I would suggest paying in full or if you can do it, a PFD.  If the PFD is not accepted I would PIF (whether via payments or lump sum) the GW then heck out of it for a removal of the CO and/or Tradeline.


Let me explain my situation in hopes it may help you compare it to yours:

 

I have a charge off unpaid account that is 3 years old. This account still reports 90+ days late each month. Soooo.......if I pay, the creditor can not hit me with late payments anymore. But the amount owed is counting towards my utilization on my revolving credit. Thus by keeping my credit card balances at zero I look like I have a utilization of 7% due to the unpaid balance. If I pay, I will have a zero. Now, paying in my case may stop the recent deliquency category from reprting after a certain time. But I may have to carry an actual balance on my cards so that I have some sort of utilization reporting. The question is, from a return on investment perspective of the score, which is greater, paying or leaving alone? 

You can wrap me in your flag, make me say a praise to your creator and make me spend your currency, but remember this, I am a loyal servant to Justice and a Patriot to none. I am free...
Valued Member
algorithmslave
Posts: 68
Registered: ‎09-10-2012
Re: will paying off a charge off improve score?

MarineVietVet wrote:

chadwicks wrote:

Yes, I understand that thanks. I should have been more clear. My question is would settled for less be less damaging then a charge off (which is what is reporting now)?


Any notation of "settled" is scored the same as a charge off.


That would depend if the creditor is still reporting late payments every month, right? 

You can wrap me in your flag, make me say a praise to your creator and make me spend your currency, but remember this, I am a loyal servant to Justice and a Patriot to none. I am free...
Mega Contributor
RobertEG
Posts: 18,215
Registered: ‎03-19-2007
Re: will paying off a charge off improve score?

The impact, in my opinion, is far more than your FICO score.   Not paying it, if they do a manual review, may be a show-stopper for any prospective creditor, regardless of your three digit score.

 

A CO is, in its initial reporting, a posting to all that not only have you been delinquent in your debt, but that your delinquency has reached the stage that, in the creditor's opinion, you are not going to pay.  The accounting term is "uncollectible."

 

Paying can show them incorrect, and demonstrate that paying your obligated debt is important to you.

Not paying simply reinforces the negative observation made by that creditor.

Being under a payment plan does offset that perception.....

Valued Member
algorithmslave
Posts: 68
Registered: ‎09-10-2012
Re: will paying off a charge off improve score?

RobertEG wrote:

The impact, in my opinion, is far more than your FICO score.   Not paying it, if they do a manual review, may be a show-stopper for any prospective creditor, regardless of your three digit score.

 

A CO is, in its initial reporting, a posting to all that not only have you been delinquent in your debt, but that your delinquency has reached the stage that, in the creditor's opinion, you are not going to pay.  The accounting term is "uncollectible."

 

Paying can show them incorrect, and demonstrate that paying your obligated debt is important to you.

Not paying simply reinforces the negative observation made by that creditor.

Being under a payment plan does offset that perception.....


Thats an interesting tone-of-thought you expressed. Allow me to ask you this, than what is the reasn for a three digit score in the first place?  Paying this type of debt shows a lack of knowledge of the score. Not paying shows knowledge of the three digit score. Look man, I dont make the rules, I just try too live in them. I have lots of other obligations/debt that tells the real story. The scrore is used as qualification first than interest rate next. The score was part of "Regan Econocis" back in the 80's to stop bias in lending. If you ask me, this type of scoring amounts to nothing than Pegan Esoteric Tools. Numerology to be exact. 

You can wrap me in your flag, make me say a praise to your creator and make me spend your currency, but remember this, I am a loyal servant to Justice and a Patriot to none. I am free...