topic Re: Charge offs factor into credit utilization? in Rebuilding Your Credit

Charge offs factor into credit utilization?

House2021 — Tue, 23 Mar 2021 04:02:00 GMT

Are charge off accounts factored into credit utilization? If I pay off all my charge offs (settle less than owed) will it give a decent score increase? I will still have collections on there after paying the charge offs. For those that settled charge offs (can't be deleted), how much did your scores improve?

Re: Charge offs factor into credit utilization?

OmarGB9 — Tue, 23 Mar 2021 04:09:00 GMT

Yes, even though front end credit monitoring dashboards may not show it. In the background though, it's being factored into your score. As far as score increases you could potentially see, with collections still showing, they'll probably be minimal. It's hard to say though.

Re: Charge offs factor into credit utilization?

House2021 — Tue, 23 Mar 2021 04:14:41 GMT

What if it's a big charge-off amount?

Re: Charge offs factor into credit utilization?

Jnbmom — Tue, 23 Mar 2021 04:18:25 GMT

@House2021 wrote:
What if it's a big charge-off amount?

If you still have a collection showing, as stated it will be a minimal gain...............................

Re: Charge offs factor into credit utilization?

refereeguy1390 — Tue, 23 Mar 2021 09:57:56 GMT

I have a question too on this topic. I'm assuming the credit limit of the charge off card does not get included in the utilization calc? That would make the most sense, but I couldn't find an answer.

Re: Charge offs factor into credit utilization?

House2021 — Tue, 23 Mar 2021 11:27:54 GMT

What if I paid off the collections? If I have charge offs paid to $0 balance with late payments, isn't that still a dirty score card or would that get me rebucketed?

Re: Charge offs factor into credit utilization?

Anonymous — Tue, 23 Mar 2021 11:32:11 GMT

@Jnbmom wrote:
@House2021 wrote:
What if it's a big charge-off amount?
If you still have a collection showing, as stated it will be a minimal gain...............................

Agreed. The utilization drop will help but in the grand scheme of adverse scoring factors, a CO is up near a BK. Its weight on your scores would exceed that of utilization, so the effect of lowering utilization will be overshadowed by the existence of the CO on the report.

Re: Charge offs factor into credit utilization?

simplegirl — Tue, 23 Mar 2021 11:33:27 GMT

@House2021 wrote:
What if I paid off the collections? If I have charge offs paid to $0 balance with late payments, isn't that still a dirty score card or would that get me rebucketed?

The collections would have to be removed to be rebucketed. Paying stuff off doesn't change the scorecard because everything you paid off is still present.

Re: Charge offs factor into credit utilization?

OmarGB9 — Tue, 23 Mar 2021 12:03:28 GMT

@House2021 wrote:
What if I paid off the collections? If I have charge offs paid to $0 balance with late payments, isn't that still a dirty score card or would that get me rebucketed?

Still would not help much unless you got the collections completely removed. A paid collection looks better than an unpaid one, but scoring wise it doesn't help much. And yes, having a CO puts you in a dirty scorecard, but when collections are still present, you're on a "public record" scorecard which is an even lower tier dirty scorecard. It gives you a ceiling you can't really get past until ALL collections are removed.

Re: Charge offs factor into credit utilization?

House2021 — Tue, 23 Mar 2021 12:08:00 GMT

Do you know what type of ceiling that would be? What a score would max out at? Is it better to payoffall my charge offs or all my collections? Right now I can only do one or the other,each category is about $4000 each (amount I think I could settle for)

Re: Charge offs factor into credit utilization?

OmarGB9 — Tue, 23 Mar 2021 12:15:14 GMT

@House2021 wrote:
Do you know what type of ceiling that would be? What a score would max out at? Is it better to payoffall my charge offs or all my collections? Right now I can only do one or the other,each category is about $4000 each (amount I think I could settle for)

No, I do not because the FICO algorithm is proprietary and no one knows the details of it. I can only tell you from my personal experience that the "ceiling" with an unpaid collection still showing, 1 unpaid CO and 6 paid COs is probably between 640-650 until I can get the 1 collection removed. My current scores are in my signature, with Experian being my highest.

As for what your should do, well as I mentioned, scoring wise paying collections does very little, but paying COs helps more. However, what you should pay first also depends on the age of the accounts. If the COs haven't been sold to a CA yet, then probably take care of those. But if you have COs that already sold the debt to a CA and it's been a few years, I'd take care of the CAs before they sue you for the full amount plus late fees.

Re: Charge offs factor into credit utilization?

satio — Tue, 23 Mar 2021 12:29:50 GMT

@refereeguy1390 wrote:
I have a question too on this topic. I'm assuming the credit limit of the charge off card does not get included in the utilization calc? That would make the most sense, but I couldn't find an answer.

I don't think I saw an answer to your question so I will chime in...

The amount owing is added in but the original credit limit of the charge off account is not.

Stated simply..:

If you have an open active CC account with 0 balance on 1000 CL and a CO CC account with 1000 owing and these are the only accounts then your utilization is 100 percent.

Re: Charge offs factor into credit utilization?

Anonymous — Tue, 23 Mar 2021 14:12:52 GMT

^^^ be careful, there are CAs such as Portfolio who have no qualms about suing you too.

Re: Charge offs factor into credit utilization?

House2021 — Tue, 23 Mar 2021 15:29:45 GMT

Basically, I have 5 charge offs ($8300 - will settle for $1100, one for $8400, one for $3000, one for $1300, one for $1000), I'm hoping to settle all of them for under $5000, I was thrown for a curveball because I was negotiating with the $8400 and they were wanting more than I had planned as we disagree on the balance owed. I also have 8 collections, 4 with midland, 4 with Portfolio so I know they will delete, my goal is to settle that $11,000 for $4500 (40 percent of what's owed) but planned to hold off until next month. Now that I know I could go from public records scorecard to just dirty scorecard I think I might pursue that, but meanwhile the high credit utilization with the charge offs are holding me back too. All of these are 5 years old, outsideSOL I'm treading very carefully to avoid restarting that. I'm only pursuing this as even the rental market in SoCal is very competitive and I'm debating buying rather than renting because what I'm looking to buy is unique (duplex/house with duplex) to have my mom move closer to us. My Fico 8 scores are currently 581, 605, and 640 as of two weeks ago before getting two collections removed (through disputes - I actually got a total of 4 collections removed early through disputing). My mortgage ficos before those two changes were 583, 631, and 639 - I'm trying to get to 660. I'm also wondering if I should try to negotiate with collection agencies before they see that I paid any charge off accounts) I have a relative on a public record scorecard (recent chapter 7) and they somehow have a 700!

Re: Charge offs factor into credit utilization?

OmarGB9 — Tue, 23 Mar 2021 17:26:11 GMT

I hope they agree to your 40% of the balance offers, but just temper your expectations because they very well may not, even if it is outside of SOL. But yes, I mean just try to take care of everything as quickly as possible, because CAs may become sue happy and COs may sell off/hire CAs, so it's a tough place to be in. Also be careful of getting collections removed via simply disputing - sometimes this works and they stay off, but sometimes it *appears* to work because the collection gets removed, but then a month or a few months later it reappears because the CAs do their housekeeping and realize their TL got deleted so they add it right back on your report (which they are allowed to do as long as they are within the 7.5 year reporting window).

Re: Charge offs factor into credit utilization?

simplegirl — Tue, 23 Mar 2021 18:46:47 GMT

@OmarGB9 wrote:
I hope they agree to your 40% of the balance offers, but just temper your expectations because they very well may not, even if it is outside of SOL. But yes, I mean just try to take care of everything as quickly as possible, because CAs may become sue happy and COs may sell off/hire CAs, so it's a tough place to be in. Also be careful of getting collections removed via simply disputing - sometimes this works and they stay off, but sometimes it *appears* to work because the collection gets removed, but then a month or a few months later it reappears because the CAs do their housekeeping and realize their TL got deleted so they add it right back on your report (which they are allowed to do as long as they are within the 7.5 year reporting window).

I agree with disputing collections that may work temporarily since a disputed a collection with waypoint and they deleted but then it came back a year or so later and stuck there after that.

Re: Charge offs factor into credit utilization?

House2021 — Tue, 23 Mar 2021 21:46:50 GMT

Oh I'm not worried about those disputed accounts coming back to me, all four of the companies gave me a letter stating they have agreed to remove those collections directed the credit bureaus to remove them will not reinstate it and will cease any future collection efforts so should they ever show up again I have letters on their letter head agreeing to do that.

Re: Charge offs factor into credit utilization?

simplegirl — Tue, 23 Mar 2021 21:49:03 GMT

@House2021 wrote:
Oh I'm not worried about those disputed accounts coming back to me, all four of the companies gave me a letter stating they have agreed to remove those collections directed the credit bureaus to remove them will not reinstate it and will cease any future collection efforts so should they ever show up again I have letters on their letter head agreeing to do that.

Yeah but that was from those companies so if the debts are valid they can resell to another company that you don't have that agreement with.

Re: Charge offs factor into credit utilization?

OmarGB9 — Tue, 23 Mar 2021 23:39:21 GMT

@simplegirl wrote:
@House2021 wrote:
Oh I'm not worried about those disputed accounts coming back to me, all four of the companies gave me a letter stating they have agreed to remove those collections directed the credit bureaus to remove them will not reinstate it and will cease any future collection efforts so should they ever show up again I have letters on their letter head agreeing to do that.
Yeah but that was from those companies so if the debts are valid they can resell to another company that you don't have that agreement with.

Correct, unless the debt was paid prior to this agreement being made.

Re: Charge offs factor into credit utilization?

Anonymous — Wed, 24 Mar 2021 00:58:08 GMT

I recently had 4 charge-offs in 2020 due to having to close the doors of my business due to the pandemic. The charge offs were fresh, so I gained the points back. Capital One (Had 5 years), 2 First Premier cards (3 years and 1 year) and an Indigo (1 year). I had not been late on any of them prior to the pandemic. I settled all 4 for less than full. I gained 15 points for Cap One, 47 points for both First Premier and 23 points for Indigo. However, when I applied for a loan with NFCU, I was denied because of the past derogatory accounts.