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What should I do with NFCU charge off?

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Anonymous
Not applicable

What should I do with NFCU charge off?

Applying for a mortgage soon. Husband's scores are in the 750s, but I believe lenders will use my scores to qualify us. I just checked my FICO 2, 4, and 5 and my scores are 559, 562, and 585. Assuming they'll use my middle score, I need to get at least to 580 for FHA. I have a NFCU charge off of about $7500 which is actually a hundred higher than what my credit limit was. My credit utilization is super low (1%) however my revolving credit ratio is extremely high (101%) due to this NFCU charge off being reported as part of my revolving balance. My question is...will paying off the $7500 balance improve my scores? Would NFCU agree to delete the "charge off"? Would NFCU allow me to reopen the card as a normal credit card after being charged off and paying the balance? Interested in your expertise. 

Message 1 of 10
9 REPLIES 9
Anonymous
Not applicable

Re: What should I do with NFCU charge off?

At best, if all I can get done is the NFCU balance paid off, I'm wondering if that alone will make a difference in my scores as it should report my revolving credit ratio to be 1% just like my credit utilization. 

Message 2 of 10
thornback
Senior Contributor

Re: What should I do with NFCU charge off?

Paying the charge-off so it reports a $0 balance will reduce your utilization and likely result in a decent point increase -- I can't say how much, nor can I say whether you'll reach 580 as each credit profile is different and a lot depends on when NFCU last updated the account and how they update the account when reflecting payment (whether they'll update the payment history with additional charge-off notations for the months leading up to payment).  The updating of a negative account that hasn't updated in a while often results in a point loss but it's likely the points gained from reduced util will outweigh the points lost from an update so you end up with a net gain.  It's also possible that the points gained and lossed will be about equal and ultimately cancel eachother out, leaving you with not much of a swing either way.  Considering the current high util, I think it's unlikely you'll see a net loss.   

 

Once paid, the account will remain closed - NFCU will not reopen the account and allow you to continue using it as if nothing happened - that's not how charge-offs work.  NFCU does, however, forgive such mishaps so long as you make them whole again - meaning you pay the balance owed and in full (not a settled amount).  They have been known to allow members to obtain credit again; usually starting them off with a secured card that will eventually graduate to unsecured - a process that can take anywhere from 6 months to 2 years.   

 

NFCU is also not known to delete paid charge-offs.  It will likely remain on your reports for the 7 years following the DOFD.   That said, it never hurts to ask... 

 

Your scores can begin to recover from charge-off once it's paid and no longer updating regulary or periodically, though the negative will hurt for the entire time it remains on your reports.

Personal Aphorism:"Forget What You Feel, Remember What You Deserve"
Starting FICO 8s | 09/2017: EX 641 ✦ EQ 634 ✦ TU 647
Current FICO 8s | 04/2022: EX 796 ✦ EQ 793 ✦ TU 790
Current FICO 9s | 04/2022: EX 790 ✦ EQ 788 ✦ TU 782
2022 Goal Score | 800s

My AAoA:
4.6 years not incl. AU / 4.9 years incl. AU
My AoOA: 9.2 years not incl. AU / 11.2 years incl. AU
Inquiries: EX 0/12 ✦ EQ 0/12 ✦ TU 0/12
Report Status: Clean
Garden Status:  


Without patience, we will learn less in life. We will see less. We will feel less. We will hear less. Ironically, rush and more usually mean less.
Message 3 of 10
SouthJamaica
Mega Contributor

Re: What should I do with NFCU charge off?


@Anonymous wrote:

Applying for a mortgage soon. Husband's scores are in the 750s, but I believe lenders will use my scores to qualify us. I just checked my FICO 2, 4, and 5 and my scores are 559, 562, and 585. Assuming they'll use my middle score, I need to get at least to 580 for FHA. I have a NFCU charge off of about $7500 which is actually a hundred higher than what my credit limit was. My credit utilization is super low (1%) however my revolving credit ratio is extremely high (101%) due to this NFCU charge off being reported as part of my revolving balance. My question is...will paying off the $7500 balance improve my scores? Would NFCU agree to delete the "charge off"? Would NFCU allow me to reopen the card as a normal credit card after being charged off and paying the balance? Interested in your expertise. 


1. Paying off the $7500 will GREATLY improve your scores

2. I don't know the answer as to whether NFCU will delete it; you can certainly try.

3. Your revolving credit utilization is not 1%, it's 101%.

4. It is highly unlikely that you would be able to "reopen" the card.  I would l not be surprised for NFCU to approve you for a new card, once the charged off account has been paid up.

 


Total revolving limits 741200 (620700 reporting) FICO 8: EQ 703 TU 704 EX 691

Message 4 of 10
SouthJamaica
Mega Contributor

Re: What should I do with NFCU charge off?


@Anonymous wrote:

At best, if all I can get done is the NFCU balance paid off, I'm wondering if that alone will make a difference in my scores as it should report my revolving credit ratio to be 1% just like my credit utilization. 


Yes that alone will make a huge difference in your scores.


Total revolving limits 741200 (620700 reporting) FICO 8: EQ 703 TU 704 EX 691

Message 5 of 10
Anonymous
Not applicable

Re: What should I do with NFCU charge off?

Thank you all. Would it make a difference for my credit if I settle or pay in full? I recognize that paying in full may allow me to have a relationship with NFCU. Thinking of settling in the meantime to get my credit score points and then paying NFCU the rest once I'm able. I can pay in full today but prefer to save more since we're trying to buy our second home soon. 

Another question. myFICO and experian apps both show my credit usage as 1%, so it doesn't calculate this charge off. However, when I go into "what's hurting" my score, that's where I see the revolving  credit utilization is 101%. Weird that it's different. I suppose credit usage is only calculating open accounts and is not accurate for my scoring. 

NFCU is reporting the account as charged off each month all the way up to Dec 2021 (I'm sure Jan 2022 will report soon). With that said, is it fair to assume that I shouldn't lose points by paying since they're actively reporting it anyway?

Message 6 of 10
thornback
Senior Contributor

Re: What should I do with NFCU charge off?

You can certainly settle now and pay the remaining later if/when you want to reestablish a relationship.  The only difference will be a "Settled for less" notation in the account comments, but it won't affect scoring ('paid in full' simply looks better to lenders when manually reviewing your reports). 

 

The utilization of 1% is not wholly accurate as this is only counting your open, active accounts but FICO incudes outstanding balances on closed/charged off accounts in its scoring calculations - so it is absolutely affecting your score.  The fluff front end software of these credit sites are geared towards making things easier for consumers to understand but they often just lead to confusion instead. 

 

If the account is updating every month then yes, it's safe to assume no points will be lost from the final update to paid status - in fact, I'd expect an immediate boost from the reduced util.  Your scores will also continue to recover and increase over the coming months since the constant updates will cease and the negative is finally able to age. 

Personal Aphorism:"Forget What You Feel, Remember What You Deserve"
Starting FICO 8s | 09/2017: EX 641 ✦ EQ 634 ✦ TU 647
Current FICO 8s | 04/2022: EX 796 ✦ EQ 793 ✦ TU 790
Current FICO 9s | 04/2022: EX 790 ✦ EQ 788 ✦ TU 782
2022 Goal Score | 800s

My AAoA:
4.6 years not incl. AU / 4.9 years incl. AU
My AoOA: 9.2 years not incl. AU / 11.2 years incl. AU
Inquiries: EX 0/12 ✦ EQ 0/12 ✦ TU 0/12
Report Status: Clean
Garden Status:  


Without patience, we will learn less in life. We will see less. We will feel less. We will hear less. Ironically, rush and more usually mean less.
Message 7 of 10
Anonymous
Not applicable

Re: What should I do with NFCU charge off?

You are so helpful! Thank you for the detailed response!!

Message 8 of 10
thornback
Senior Contributor

Re: What should I do with NFCU charge off?

YW!  Best of luck with everything!

Personal Aphorism:"Forget What You Feel, Remember What You Deserve"
Starting FICO 8s | 09/2017: EX 641 ✦ EQ 634 ✦ TU 647
Current FICO 8s | 04/2022: EX 796 ✦ EQ 793 ✦ TU 790
Current FICO 9s | 04/2022: EX 790 ✦ EQ 788 ✦ TU 782
2022 Goal Score | 800s

My AAoA:
4.6 years not incl. AU / 4.9 years incl. AU
My AoOA: 9.2 years not incl. AU / 11.2 years incl. AU
Inquiries: EX 0/12 ✦ EQ 0/12 ✦ TU 0/12
Report Status: Clean
Garden Status:  


Without patience, we will learn less in life. We will see less. We will feel less. We will hear less. Ironically, rush and more usually mean less.
Message 9 of 10
SouthJamaica
Mega Contributor

Re: What should I do with NFCU charge off?


@Anonymous wrote:

Thank you all. Would it make a difference for my credit if I settle or pay in full? I recognize that paying in full may allow me to have a relationship with NFCU. Thinking of settling in the meantime to get my credit score points and then paying NFCU the rest once I'm able. I can pay in full today but prefer to save more since we're trying to buy our second home soon. 

Another question. myFICO and experian apps both show my credit usage as 1%, so it doesn't calculate this charge off. However, when I go into "what's hurting" my score, that's where I see the revolving  credit utilization is 101%. Weird that it's different. I suppose credit usage is only calculating open accounts and is not accurate for my scoring. 

NFCU is reporting the account as charged off each month all the way up to Dec 2021 (I'm sure Jan 2022 will report soon). With that said, is it fair to assume that I shouldn't lose points by paying since they're actively reporting it anyway?


Paying in full is much better.

 

 


Total revolving limits 741200 (620700 reporting) FICO 8: EQ 703 TU 704 EX 691

Message 10 of 10
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