What should I do next?

[Anonymous]

Quick summary: I disputed a 6 year old charge-off ($2400, Merrick Bank) that essentially woke it up by updating the reporting date, causing a 38 point drop in my EQ score (and smaller, yet significant drops in my EX and TU scores).

The question now is...what should my next move be? I understand the MyFico score simulator is purely for educational purposes, but it shows that paying even a quarter of this balance would raise all of my scores anywhere from 20-30 points. Does that makesense for a closed, charged off account? I've always read that paid charge offs aren't that favorable.

I'd let it just sit there until it falls off in 15 months, but I was about to begin the process of applying for a USDA mortgage before this happened and that dispute really set me back to the point where manual underwriting is probably the only option.

[gdale6]

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@Anonymous wrote:

Quick summary: I disputed a 6 year old charge-off ($2400, Merrick Bank) that essentially woke it up by updating the reporting date, causing a 38 point drop in my EQ score (and smaller, yet significant drops in my EX and TU scores).

The question now is...what should my next move be? I understand the MyFico score simulator is purely for educational purposes, but it shows that paying even a quarter of this balance would raise all of my scores anywhere from 20-30 points. Does that makesense for a closed, charged off account? I've always read that paid charge offs aren't that favorable.

I'd let it just sit there until it falls off in 15 months, but I was about to begin the process of applying for a USDA mortgage before this happened and that dispute really set me back to the point where manual underwriting is probably the only option.

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Unfortunately this had not updated in a while and the dispute cause the Fico drop since it looks new. Its being included in your utilization calcs so paying it is likely to increase your score based on getting the balance down to 0. I would send them the PFD and if they wont do it I would still settle it to stop any further updating.

http://ficoforums.myfico.com/t5/Rebuilding-Your-Credit/PFD-Q-amp-A-Examples-and-PFD-Success-Stories/td-p/2031275

http://ficoforums.myfico.com/t5/Rebuilding-Your-Credit/PFD-Example-Letter/td-p/4519

[Anonymous]

If PFD isn't successful, will settling the account re-start the seven year clock? I'm pretty well insulated since I have multiple open installment and revolving accounts with excellent payment histories and low utilization, but I was really looking forward to this and a few other paid charge offs falling away next year.

[RobertEG]

No.

The exclusion date for any charge-off or collection is based only on one date-certain, which is the date of first delinquency on the OC account in the most recent chain of deliquency that preceded the CO or collection.

Payment or non-payment, or any other activity, does not affect the DOFD, and thus does not reset the exclusion date.

[Anonymous]

I spoke with Merrick this evening, who transferred me to the assignee (Carson-Smithfield). I spoke in strictly hypothetical terms ("I'm not saying this is mine...I'm just saying I want it to go away"), and she offered to mail me validation and a settlement offer of about 30%. She wouldn't budge on deleting it...as expected...nor would she commit to anything more than noting it as "settled for less than full" in my reports. 

The way I see it, I don't think this account can cause me to lose any more points than it already has in the last month. Knocking it down to a $0 balance for $700 certainly gets the albatross off my neck, and even if the simulator is half right, maybe I can actually gain a few points in the deal before this whole thing drops off my report next year.

I'd appreciate anyone's thoughts before I finalize this sometime next week.

[Anonymous]

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@RobertEG wrote:

No.

The exclusion date for any charge-off or collection is based only on one date-certain, which is the date of first delinquency on the OC account in the most recent chain of deliquency that preceded the CO or collection.

Payment or non-payment, or any other activity, does not affect the DOFD, and thus does not reset the exclusion date.

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Much appreciated, Robert. That's good news.