topic Re: Credit utilization with charged-off accounts--how they affect the score in Rebuilding Your Credit

Credit utilization with charged-off accounts--how they affect the score

LRC — Wed, 03 Jan 2024 06:16:38 GMT

Hello,

I have 6 cards that were all charged off about a year ago because I stopped paying them (job loss & major depression). One company filed a lawsuit, two were sold to collections. The other three cc companies had not sold the debt yet.

I started working with a nonprofit credit agency, and they arranged a payment plan to pay them all off over several years, with no interest accruing. They also negotiated two of the credit cards down so I would pay less than I owed at the time of charge-off.

The biggest point of the issue is I will be able to pay them off due to an unforseen cash influx that I'm pretty sure is coming my way this month.

That said, I know utilization rate is important to the score.

Other than these 6 accounts, I have two revolving accounts that are in good standing: one that I have been an authorized user on that is generally around 15% utilization, and one small limit cc that is at about 40%. I also have two student loans in good standing. That's it.

Should I not pay all of the charge offs all the way in order to keep some utilization on those lines of credit? Or should I get them all down to zero, and then lower the ones in good standing to less than 10%?

I know that they will change to say "paid" once they've been paid. Not sure how that affects the score, too.

Re: Credit utilization with charged-off accounts--how they affect the score

Brian_Earl_Spilner — Wed, 03 Jan 2024 13:13:21 GMT

Charge offs affect your utilization but they don't factor the limits into the calculation. So if your charge off balances are higher than your open limits you are at over 100% utilization. They should be paid off so they're no longer affecting utilization.

Re: Credit utilization with charged-off accounts--how they affect the score

bass_playr — Wed, 03 Jan 2024 14:37:36 GMT

To add to Brian's post, they also should be paid off because leaving an unresolved charge-off on your credit means it can be updated as a charge-off, which will also continue to hurt your score. When a charge-off is paid off, it is no longer updated, and this allows the negative effect to reduce over time. Unpaid collections harm you in multiple ways.

Re: Credit utilization with charged-off accounts--how they affect the score

LRC — Mon, 15 Jan 2024 20:18:56 GMT

Thank you for your help.@bass_playr and @Brian_Earl_Spilner

It turns out, I did not get the work bonus/"unforseen cash influx"!! lol

There's no fairy godmother coming to save me hahaha

I'm done licking my wounds and ready to move forward. I just made a new post to the forum with the full picture of where I am.

Again, appreciate your help.