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Charge-Off's count toward Utilization? This is CRUSHING me

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New Contributor

Charge-Off's count toward Utilization? This is CRUSHING me

I had a rough patch a couple years back and charged-off a $5,000 + Chase card.

 

It is now biting me in the butt, as even though it is marked "Charged Off", the $5,000 balance is still crushing my utiliziation % on EXPERIAN and TRANSUNION.

 

Equifax doesn't seem to be counting it, so my utilization is only 20%. But Experian and Transunion are counting the $5k and my utilization is around 100% because of it. 

 

Is this normal? My other charged-off card is not counting toward my utilization %, as I couldn't pay it back even if I wanted to.

 

 

Message 1 of 21
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Moderator

Re: Charge-Off's count toward Utilization? This is CRUSHING me

Hi @The_Rooster  and welcome to the forums 

 

 

Charged off cards count towards utilization, so if EQ is somehow not including in, just consider yourself lucky. 

Just because card is charged off, it does not mean that balance on it is $0.00. It's an accounting measure,  meant to remove the amount from receivable assets

As long as it remains unpaid or is no longer reportable, it will continue affecting your utilization, so yes, it's normal. 

You might be sleep deprived if you try opening car door with Samsung Pay
Message 2 of 21
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Re: Charge-Off's count toward Utilization? This is CRUSHING me

Thank you @Remedios ... So, how do I lower the utilization? Chase says I cant pay it, because it's charged off.

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Re: Charge-Off's count toward Utilization? This is CRUSHING me


@The_Rooster wrote:

Thank you @Remedios ... So, how do I lower the utilization? Chase says I cant pay it, because it's charged off.


Is there a collection associated with it? What's the DOFD? 

You might be sleep deprived if you try opening car door with Samsung Pay
Message 4 of 21
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Re: Charge-Off's count toward Utilization? This is CRUSHING me


@Remedios wrote:

@The_Rooster wrote:

Thank you @Remedios ... So, how do I lower the utilization? Chase says I cant pay it, because it's charged off.


Is there a collection associated with it? What's the DOFD? 


I haven't seen a collection yet. 

 

But if that happens, wouldn't that mean I have DOUBLE the amount for one account? A $5,000 Original Credit account AND a $5,000 collection account? 

 

DOFD was March 2018.

Message 5 of 21
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Re: Charge-Off's count toward Utilization? This is CRUSHING me

If it was charged off and sold then the balance should be reported as 0. I think because once the collection pop up, it would be like double dipping. In my case, all of my charge offs that were sold were updated to a 0 balance. The ones that were just charged off but not sold sti retained the same balance. I would see if it was sold and if so, report to the credit bureaus that the balance is 0 with them which is technically true since they sold the balance to another company so they no longer have it on their books.

Message 6 of 21
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Moderator

Re: Charge-Off's count toward Utilization? This is CRUSHING me


@The_Rooster wrote:

@Remedios wrote:

@The_Rooster wrote:

Thank you @Remedios ... So, how do I lower the utilization? Chase says I cant pay it, because it's charged off.


Is there a collection associated with it? What's the DOFD? 


I haven't seen a collection yet. 

 

But if that happens, wouldn't that mean I have DOUBLE the amount for one account? A $5,000 Original Credit account AND a $5,000 collection account? 

 

DOFD was March 2018.


No, it would not double. 

I dont know who you talked to at Chase told you that you cannot pay it. 

If they did not forward it to collection agency , you should be able to pay it directly. 

If they forwarded it to collections (but it's not reporting yet), you would want to know who to contact. 

It's a fairly recent CO, high amount, Chase is prone to engaging in litigation, so I'd keep calling if I were you. 

 

Document all the calls, who you talked to, what they told you, dates and time. You'll need this if at some point you have to file a complaint. 

You might be sleep deprived if you try opening car door with Samsung Pay
Message 7 of 21
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Re: Charge-Off's count toward Utilization? This is CRUSHING me


@Remedios wrote:

@The_Rooster wrote:

@Remedios wrote:

@The_Rooster wrote:

Thank you @Remedios ... So, how do I lower the utilization? Chase says I cant pay it, because it's charged off.


Is there a collection associated with it? What's the DOFD? 


I haven't seen a collection yet. 

 

But if that happens, wouldn't that mean I have DOUBLE the amount for one account? A $5,000 Original Credit account AND a $5,000 collection account? 

 

DOFD was March 2018.


No, it would not double. 

I dont know who you talked to at Chase told you that you cannot pay it. 

If they did not forward it to collection agency , you should be able to pay it directly. 

If they forwarded it to collections (but it's not reporting yet), you would want to know who to contact. 

It's a fairly recent CO, high amount, Chase is prone to engaging in litigation, so I'd keep calling if I were you. 

 

Document all the calls, who you talked to, what they told you, dates and time. You'll need this if at some point you have to file a complaint. 


Ok, I'm going to call back and give them my name this time.

 

I asked a generic question last time "IF my account is charged off, etc etc".

 

Now i'll just tell them who I am.

Message 8 of 21
Legendary Contributor

Re: Charge-Off's count toward Utilization? This is CRUSHING me

A charge-off should be looked at as a form of reporting of degree of delinquency, and just as revolving balances are not removed from scoring under % util based on the account being, for example, 150-days late, they are not removed from % uti scoring based on having been charged-off.

 

A charge-off is taken, and sometimes required under federal regs, when a delinquent account has been determined to have reached the stage where it is not reasonably expected to be repaid, 

Federal regs generally require banks to charge delinquent debts to profit and loss once an installment loan reaches 120-late, or a revolving debt reaches 180-late.  Those periods of delinquency are considered as reasonable evidence that consumer repayment has become unlikely.

 

From an accounting point of view, a CO is intended to prevent creditors and businesses from overstating their "real" assets in accounting statements provided to their shareholders and potential investors by removing the delinquent debt from  their statement of assets, and moving it to a column that is not summed as an asset.  The intent of the regs is to provide a more accurate statement of assets.

 

Taking of a CO does not remove continued obligation of the consumer for the entire debt, does not remove the ability to continue reporting of current and prior monthly payment history delinquency, or prevent the creditor or debt collector from continued collection attempts.

 

The CRAs provides creditors, as separate codes under their common credit reporting manual, the option to report both current and prior payment history profile delinquency status as either months delinquent (e.g., 120-late) OR as CO, which additonally states that the debt is not expected to be paid, and provides the length of the delinquency by reference to the separately reported DOFD.

 

Just as reporting of 150-late, for example, does not remove a delinquent revolving debt from continued scoring under % util, a curent balance continues to be scored under % util until paid or otherwise discharged.

There are several ways a debt is updated to show a current balance of $0.

First, is, obviously, by paying the debt.

Second is if the creditor sells the debt to another.  They are then required to promptly report a current debt balance of $0.

Third is by discharge under bankruptcy.

Fourth is if the creditor decides to formally cancel the debt, which sometimes done if they dont wish to sell the debt or to continue collection attempts.  If they formally cancel the debt, they are required to send notice to the IRS if the amount is $600 or more via IRS form 1099c, a copy of which is also provided to the consumer.

 

 

 

Message 9 of 21
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Re: Charge-Off's count toward Utilization? This is CRUSHING me


@RobertEG wrote:

A charge-off should be looked at as a form of reporting of degree of delinquency, and just as revolving balances are not removed from scoring under % util based on the account being, for example, 150-days late, they are not removed from % uti scoring based on having been charged-off.

 

A charge-off is taken, and sometimes required under federal regs, when a delinquent account has been determined to have reached the stage where it is not reasonably expected to be repaid, 

Federal regs generally require banks to charge delinquent debts to profit and loss once an installment loan reaches 120-late, or a revolving debt reaches 180-late.  Those periods of delinquency are considered as reasonable evidence that consumer repayment has become unlikely.

 

From an accounting point of view, a CO is intended to prevent creditors and businesses from overstating their "real" assets in accounting statements provided to their shareholders and potential investors by removing the delinquent debt from  their statement of assets, and moving it to a column that is not summed as an asset.  The intent of the regs is to provide a more accurate statement of assets.

 

Taking of a CO does not remove continued obligation of the consumer for the entire debt, does not remove the ability to continue reporting of current and prior monthly payment history delinquency, or prevent the creditor or debt collector from continued collection attempts.

 

The CRAs provides creditors, as separate codes under their common credit reporting manual, the option to report both current and prior payment history profile delinquency status as either months delinquent (e.g., 120-late) OR as CO, which additonally states that the debt is not expected to be paid, and provides the length of the delinquency by reference to the separately reported DOFD.

 

Just as reporting of 150-late, for example, does not remove a delinquent revolving debt from continued scoring under % util, a curent balance continues to be scored under % util until paid or otherwise discharged.

There are several ways a debt is updated to show a current balance of $0.

First, is, obviously, by paying the debt.

Second is if the creditor sells the debt to another.  They are then required to promptly report a current debt balance of $0.

Third is by discharge under bankruptcy.

Fourth is if the creditor decides to formally cancel the debt, which sometimes done if they dont wish to sell the debt or to continue collection attempts.  If they formally cancel the debt, they are required to send notice to the IRS if the amount is $600 or more via IRS form 1099c, a copy of which is also provided to the consumer.

 

 

 


Wow,  that was a wealth of knowledge.

 

Thank you!

Message 10 of 21
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