Settled Charge Off

[Anonymous]

I had a CO for a CC from 2015 from a local credit union that had a balance of $3,334 and they were reporting a CO monthly along with the balance, which was hurting my payment history and utilization tremendously for so long. A couple of days ago, I settled the account and this morning I checked my Experian app (as I do daily), and the account was updated to $0 and my FICO 8 shot up 51 points and they also removed all previous CO's for the account. I'm grateful for the massive score increase, but they did report a fresh CO for this month when they updated the account to settled and I wasn't expecting that. So my question is, since they removed all previous CO's, does the freshly reported CO for this month affect my credit in terms of TPOD (because I read about TPOD on this forum regarding CO's, but didn't fully understand how it worked)? This CO is set to fall off in 15 months and I settled it just so I can get a head start on rebuilding sooner so that I can purchase a home in mid 2022, but im hoping my FICO scores aren't effected in the way they removed the previous CO's and then reported a fresh CO for this month.

[SouthJamaica]

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@Anonymous wrote:

I had a CO for a CC from 2015 from a local credit union that had a balance of $3,334 and they were reporting a CO monthly along with the balance, which was hurting my payment history and utilization tremendously for so long. A couple of days ago, I settled the account and this morning I checked my Experian app (as I do daily), and the account was updated to $0 and my FICO 8 shot up 51 points and they also removed all previous CO's for the account. I'm grateful for the massive score increase, but they did report a fresh CO for this month when they updated the account to settled and I wasn't expecting that. So my question is, since they removed all previous CO's, does the freshly reported CO for this month affect my credit in terms of TPOD (because I read about TPOD on this forum regarding CO's, but didn't fully understand how it worked)? This CO is set to fall off in 15 months and I settled it just so I can get a head start on rebuilding sooner so that I can purchase a home in mid 2022, but im hoping my FICO scores aren't effected in the way they removed the previous CO's and then reported a fresh CO for this month.

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I would dispute it, saying this was not a new chargeoff, the account had been charged off 5 years ago. This was a satisfaction of the old chargeoff.

[Anonymous]

I'm not sure if that's the route I want to take. What if I were to dispute it and then the credit union ends up putting the old CO's back? 

I just was expecting them to update the balance to $0 this month and have a "no data" or "payment" status for this month, but that wasn't the case. Idk if I want to risk a dispute and they re-add the CO's from the entire time it was CO. I guess I can always call the credit union and ask why they did that, but they're closed on the weekends and impatient lol. I just wanted to know if my score would be effected in anyway in regards to the TPOD because of the way they updated it by removing the CO's each month prior and then adding a fresh one this month. 

[RobertEG]

They are not reporting "a new charge-off."

They are only reporting that the debt was, at some prior point in time, delinquent and charged-ff.

The actual business process of taking a charge-off is a one-time event, and the creditor does not report the date they actually took that accounting measure to the CRAs.  The CRA reporting codes dont even provide for the reporting/storage of the date that a charge-off was actually taken.

The creditor can, in various manners, and at any time after they took a charge-off, report that fact to a CRA.

The reporting date then references some aspect based on the CO, such as its initial amount, or as the current delinquency status or the prior monthly payment history profile for any month where the debt was both delinquent and had also previously been charged-off.

You can thus have multiple, separate credit report reference to the fact that there was a prior charge-off.  That is not the reporting of multiple charge-offs.

In the instant posted scenario, when the debt was ultimately settled, they apparently made a good-will deletion of prior reporting of payment history profile that showed CO, but then included in the reporting of Paid, Settled for Less, the additional remark that it was once charged-off.

That is not the improper reporting of a new and later charge-off, and is an acceptable reporting status under the common credit reporting manual used by the big-3 CRAs.

It all appears proper per CRA reporting procedure, and I would not dispute.

[Anonymous]

@RobertEG 

Thank you for responding....

Right, I understand what they did regarding removal of previous charge offs was nice of them (wasn't expecting that at all), and that what they did is proper reporting. I was just curious if the fact that they removed the previous charge offs and then reported a charge off this month would affect me in any way regarding the total period of delinquency. I only ask this because I read on one of the posts on here a while back how the TPOD is calculated when status are updated on CO accounts. Just curious to the particular topic of TPOD regarding this scenario. I'm completely satisfied with what they did, and it will be falling off soon regardless, so I have no reason to dispute. 

Edit to add: I guess I should find that thread where it had the info on the TPOD and how FICO's algorithm can or can't calculate scores based on that info for CO's and the TPOD. I was just curious if I'd have a negative impact on how they reported it that's all.  

[AndySoCal]

@Anonymous 

The status of the account changed from a chargeoff to a charge off that was settled. If the credit union is reporting the charge off as settled. you should see  a message that basically says. The account is paid for less than full balance.  The creditor reported it correctly. What is the status showing for account now?

[Anonymous]

@AndySoCal 

Yes, I understand they reported it correctly. That I am not questioning and I'm most definitely satisfied with how they reported it by removing the previous monthly CO statuses since the original CO occurred. 

They reported it as "paid in full for less than the full balance"

I was just curious if my FICO score would be affected in any way by them removing the previous CO statuses and then reporting a CO this month because I read somewhere on this forum that the TPOD is figured into FICO's algorithm and I wasn't sure if that was applicable to me in this particular scenario that's all. 

[Anonymous]

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@Anonymous wrote:

@AndySoCal 

Yes, I understand they reported it correctly. That I am not questioning and I'm most definitely satisfied with how they reported it by removing the previous monthly CO statuses since the original CO occurred. 

They reported it as "paid in full for less than the full balance"

I was just curious if my FICO score would be affected in any way by them removing the previous CO statuses and then reporting a CO this month because I read somewhere on this forum that the TPOD is figured into FICO's algorithm and I wasn't sure if that was applicable to me in this particular scenario that's all. 

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It was previously reporting CO monthly, so there was no latent period to pass allowing your scores to heal. The reporting this month of CO would be no different and scores should not be affected worse as there is no "catch up" "penalty" for POD in your case.

Nothing to worry about, IMO

[Anonymous]

@Anonymous 

Ok that's what I figured. Thank you! 

[RobertEG]

When any reporting references a prior charge-off, the creditor must, no later than 90 days after making any such reference, additionally report the date of first delinquency (DOFD) to the CRA.  FCRA 623(a)(5).

That is used by the CRA to then calculate the period of delinquency.   The total period of delinquency then runs from the DOFD up to the date when the current status is first reported as a non-delinquency status.

FICO then uses both the total period of delinquency and the time since termination of delinquency status in its scoring.

When any updated reporting continues to report CO as the currrent status, that is the reporting of a current delinquency status, and thus continues to increase the reported period of delinquency, and the total period of delinquency is not terminated.

However, both Paid or Settled for Less are non-delinquency current status updates that fix the final and total period of delinquency, and also permit the time since delinquency to begin to age.  Thus, the scoring impact begins to lessen.

The additional remark that is "was a charge-off" appended to the Paid or Settled statement of status is a permissible status code, and the reference therein to the prior charge-off is purely advisory to those viewing the credit report.  It does not effect the CRA determination of the total period of delinquency or the time since termination of delinquency.