topic Re: CC Charge Off Question in Rebuilding Your Credit

CC Charge Off Question

Anonymous — Mon, 15 Jun 2020 16:35:52 GMT

Hi there,

Back in 2014 I let a CC through a credit union go delinquent, it was eventually charged off in 2015 for about $2k. As of right now, it has not gone to collections, it's just sitting there as a charge off.

The rest of my credit is good, I have a handful of current CC's that have never had a late payment (Chase ($7k limit), Amex ($25k limit), Cap one ($9k limit), BofA ($1k limit), US Bank ($1k limit)), never carry any CC debt, a 5 year term car loan that was paid off in 2.5, and always current and pay above required amt on my student loans ($19k balance). DTI right now is about 20%, and scores hover around 700. Not sure if this matters but have about $13k in the bank.

My question is - what should I do about the charge off? I'm scared that if I contact the CU to talk to them about it, that it will re-alert them to the charge off and then they'll send it to collections at that point. If I can settle the charge off with them and close it out, I'm also assuming that that will cause my scores to take a dip?

The reason I'm asking about it now, after 5 years and so close to it aging off, is we will be needing to rent in August for a year. The person I'll be applying and renting with has exceptional 800+ credit. Because my score range is right around where a lot of rentals require them to be (700+ typically), am I better off leaving everything as is? Or should I try to take care of this?

It's been just about 5 years since I've applied anywhere to rent so just looking for some insight on how people look at renters credit! Last time we applied to rent, I wrote the owner a letter of explanation and introduction which helped enormously.

Thank you in advance!

Re: CC Charge Off Question

Anonymous — Mon, 15 Jun 2020 16:49:35 GMT

I would let sleeping dogs lie until it ages off. With the co-applicant being over 800 and you being around 700, I don't foresee there being an issue on getting the rental app approved. If the rental manager says that the CO needs to be taken care of, then you have the money to take care of it. Otherwise let it age off in the next 12-18 months, or pay it after you get approved and settled in to your new place.

Re: CC Charge Off Question

FireMedic1 — Mon, 15 Jun 2020 21:52:45 GMT

For one. A charge off is considered a maxed out 100% utilized credit card. Now if you pay it off. It will no longer count against your overall open and closed cards util %. If you went by the CU and paid it. Why would they send it to a collection agency afterwards. Its paid. If you want it to hopefully go un-noticed and the closer it is to fall off date. They could get more aggresive before that date and go legal on you. Best bet. Pay it. It quits reporting 100% util and you'll get a score boost from lowering your aggregate util %. You got the $. Be done with it.

Re: CC Charge Off Question

Anonymous — Mon, 15 Jun 2020 21:59:37 GMT

Thank you v much for your reply!

Re: CC Charge Off Question

Anonymous — Mon, 15 Jun 2020 22:03:37 GMT

I'm not terribly concerned about my utilization rate, it reports typically under 5% each month. I know that if I paid it they wouldn't then send it to collections, that was two separate thoughts in my original post.

If I pay it off or settle for less than total due, I'm assuming that that would impact my credit score for at least a short term? Or no?

Re: CC Charge Off Question

FireMedic1 — Mon, 15 Jun 2020 22:17:11 GMT

Your open 5% util isn't really true. The 100% charge off is factored into the aggregate or overall all open and closed accounts. No one is going to send a paid off debt to a collection agency. What are they going to collect? Its paid for. Plus it could be costing you an avg of 10-15 pints also +/-. Just go to the CU and pay it off. Done.

Re: CC Charge Off Question

TheKid2 — Mon, 15 Jun 2020 23:16:37 GMT

Just to clarify - if the CO is "sleeping" and not reporting every month, you will be penalized for the Total Period of Deliquency when you finally do pay it off. So, I would be careful to expect a score increase. The penalty for an old CO could acutally be a net decrease in score when you pay it off. It's also not necessarily proven it counts as 100% against Util - it may actually be worse and the past due balance is added to your current Util without increasing your CL. It would be interesting to know what your FICO 8 reason codes are.

That said, it is a risk carrying that past due balance that could go legal if you just ignore it.

Re: CC Charge Off Question

Anonymous — Mon, 15 Jun 2020 23:22:24 GMT

@Anonymous wrote:
Hi there,

Back in 2014 I let a CC through a credit union go delinquent, it was eventually charged off in 2015 for about $2k. As of right now, it has not gone to collections, it's just sitting there as a charge off.
The rest of my credit is good, I have a handful of current CC's that have never had a late payment (Chase ($7k limit), Amex ($25k limit), Cap one ($9k limit), BofA ($1k limit), US Bank ($1k limit)), never carry any CC debt, a 5 year term car loan that was paid off in 2.5, and always current and pay above required amt on my student loans ($19k balance). DTI right now is about 20%, and scores hover around 700. Not sure if this matters but have about $13k in the bank.

My question is - what should I do about the charge off? I'm scared that if I contact the CU to talk to them about it, that it will re-alert them to the charge off and then they'll send it to collections at that point. If I can settle the charge off with them and close it out, I'm also assuming that that will cause my scores to take a dip?
The reason I'm asking about it now, after 5 years and so close to it aging off, is we will be needing to rent in August for a year. The person I'll be applying and renting with has exceptional 800+ credit. Because my score range is right around where a lot of rentals require them to be (700+ typically), am I better off leaving everything as is? Or should I try to take care of this?

It's been just about 5 years since I've applied anywhere to rent so just looking for some insight on how people look at renters credit! Last time we applied to rent, I wrote the owner a letter of explanation and introduction which helped enormously.

Thank you in advance!

when in 2014 was the DoFD, the first late in the string that led to the CO? As we move into July, you can always see if it qualifies for EE (early exclusion), yet. 6 months out for TU, 3 Months out for EX. Don't even bother with EQ, just let it fall of naturally. I guess it just depends on what you want to do. It just depends on if it the DoFD is early enough in 2014 for your August 2020 rental date for EE to help you.

The DoFD is different than the CO date, usually. It may be a month earlier or even way before the CO. It could drop well before you think.

While my opinion is less popular, I believe if it is going to fall off within a year, to just let it slip into the night. I would be shocked if they did not take your 700ish score to rent a place, especially considering your co-renter being in the 800s. It just depends on if you want to ever get back in with them again. It doesn't wipe the debt out, but it can no longer be on your reports. They can sue you, possibly, but it totally depends on the SOL. You may already be well outside of it. Then they can take no legal action unless you "poke the bear" and reset the SOL. Nothing can reset the credit reporting 7 year window once the account is CO'd.

I would pull all 3 Credit Reports from Annual Credit report. That will have the specific dates you need. I have not seen any other CR sources offer all 3 specific dates. It is free to do (does not include scores) and you can do so weekly through 4/2021.

"Estimated date of removal" for TU. You can call them up exactly 6 months before that date (on the 1st, even) and kindly request EE from a supervisor. A front end CSR does not have the power to do this.

"On report until" for EX. They allow 3 months for EE, but that date already has 2 months baked in. You can call exactly 1 month before that date, ask for the dispute department, be clear you are not disputing the account, and kindly request EE.

Again, just let is quietly slip off EQ. They will likely muff thungs up worse. They have been known, but this is not a guarantee, to drop the TL early. I have seen reports of 1-4 months before you would expect the drop off. You can figure that date from the "date of first delinquency" listed on that CR. Add 7 years to that date and that is when it "should" drop off by.

If you just want to pay it, you absolutely can. If it is updating monthly, it is supressing your scores further and paying it (settle or PIF) will stop the monthly reporting and your scores can begin to heal while you wait for it to drop off. And like @FireMedic1 said, it will decinitely decrease your util, even though it may seem like it isn't factored into it. Maybe the 5% does include that 2k, as you do have deveral TLs with decent limits, and it wont increase your scores at all.

If it has not updated in years, the new update after paying will definitely hit your scores. It will still decrease util, so it may cancel each other out or go either way in helping/hurting you.

So think of your options and pick what you think is best for you. Everyone here has excellent advice and non are right or wrong. It is what works best for you.

Good luck!

Re: CC Charge Off Question

Anonymous — Tue, 16 Jun 2020 16:52:03 GMT

Yep I agree, I'm not expecting a score increase at all, I'll be expecting a decrease for sure. And yes I do intend on paying it, I just want to get a rental secured before I pay and my score decreases a bunch. Thanks!

Re: CC Charge Off Question

Anonymous — Tue, 16 Jun 2020 16:57:49 GMT

Thank you for your thoughtful and detailed reply! I did not know anything about early exclusion, I will look into that! And just a couple days ago I took advantage of the ability to pull free credit reports weekly.

I am anticipating a drop in scores once I pay it, as it hasn't been updated since CO in 2015.

Thank you again, I will weigh my options carefully and hopefully make the "right" choice!

Re: CC Charge Off Question

Anonymous — Fri, 19 Jun 2020 05:48:10 GMT

Yes I agree it will most likely be a decrease since it’s been sleeping for five years. Had it been regularly updating, you may have got an increase, but because it was not, it will most likely have a decrease overall.