Settling a charged off account

Anonymous · ‎09-12-2019

Hello. I have a auto loan that was charged off 5 years ago. The company is offering me a "paid in full for less than balance owed" at 15% of what I owed. I am wondering if that's a wise choice? Will my score take a HUGE hit by "settling"? Will i look better to creditors as "paid in full for less than balance owed" rather than just "charge off"?

Remedios · ‎09-12-2019

@Anonymous wrote:
Hello. I have a auto loan that was charged off 5 years ago. The company is offering me a "paid in full for less than balance owed" at 15% of what I owed. I am wondering if that's a wise choice? Will my score take a HUGE hit by "settling"? Will i look better to creditors as "paid in full for less than balance owed" rather than just "charge off"?

Hi and welcome @Anonymous

Scoring wise, it wont make a difference. It can make a big difference on manual review

Without a manual review, $0.00 balance is $0.00 balance. Computer does not care, really.

You will take a temporary scoring hit when payment is reflected on your CR if the account is currently not updating. If it is, businesses as usual.

If that's your last unpaid negative, your score can start recovering, but it's not something that happens over night. You'll still feel the presence of that account as long as it's on your CR.

Anonymous · ‎09-14-2019

@Anonymous wrote:
Hello. I have a auto loan that was charged off 5 years ago. The company is offering me a "paid in full for less than balance owed" at 15% of what I owed. I am wondering if that's a wise choice? Will my score take a HUGE hit by "settling"? Will i look better to creditors as "paid in full for less than balance owed" rather than just "charge off"?

"The company"? Is it the company you owed this to or another finance company that bought that debt? Regardless, charge-offs that are that old should really be left alone and let them age off, which in your case is only 2 more years. If you're looking to re-establish your relationship with that creditor, then you would want to consider settling that account with what is referred to as PFD (pay for deletion). Pay for deletion means you pay the account off with the agreement that they take the negative off your credit report. **With the original company**

Now, when I hear "pay in full for less than balance owed" means to me that a debt collection agency has bought that debt and is now trying to collect on it. Bad idea even acknowleging these people and no, it ***will not*** help your relationship with the original creditor.

My advice is, ignore these offers and wait another 2 years for that CO to drop off.