What to do about only having "charge-off's?"

[Kristy011]

I have 3 cards that went into collections last year and are now charge off's on my report.  I understand they wont just go away, but will it benefit me in any way to pay them off now or move on?  Also, any advice on how to increase my credit would be great.  Theres just 1 account thats active and thats our auto loan.  But the none payment of credit cards most definetly lowered my score.  What do I need to do to boost my score. Thanks in advance!

[InvincibleSummer3]

Hello, and welcome to the boards!

Some revolving credit would definitely help. Could you do a secured card? These cards are great for rebuliding, but you'll need a deposit to get started.

Could you arrange a PFD (Pay for delete) with the collections? Basically this is where you make an arrangement with the creditor to pay off the debt as long as they delete the tradeline. Paying the debt won't help, because it'll still sit there. Some creditors will delete and some won't , but it's worth a shot.

Some reading:

http://ficoforums.myfico.com/t5/Rebuilding-Your-Credit/Your-Guide-to-Credit-Scoring/m-p/718550#U7185... (good info on how your score is calculated)

http://ficoforums.myfico.com/t5/Rebuilding-Your-Credit/THE-TOP-SECURED-CARDS-ON-THE-MARKET/m-p/23359... (suggestions on secured cards)

and just do a search for PFD - there's a wealth of posts there, especially over in the rebuilding forum.

Good luck!

[RobertEG]

My opinion...

Credit standing/approval is not all about a three-digit score.

A charge-off by a prior creditor is a very damaging reporting.  It is basicially a statement by a prior creditor that, not only are you in arrears in payment of debt, but that the arrears has reached a point where they have made the determination that you are NOT going to pay at all.  Your debt has become "uncollectilbe" in their eyes.

Not a statement that will have creditors standing in line.  In fact, the presence of unpaid delinquent debt can, in and of itself, be basis for denail of new credit, regardless if the consumer's score might otherwise qualiify.

While paying the debt willl not have a significant impact on score, it at least demonstrates to others that you had no intention of stiffing the debt, but rather had some prior bad times that have now been overcome, and you did, in fact, make good on the debt.

Additionally, while a CO is still within its CR exclusion period, it can be referred to collection or sold, which can also report.  Paying is a guard against further potential damage.

As for improviing score, FICO likes to see a showing of effective use of multiple, discretionary (revolving) lines of credit.  Thus, securing at least one, and preferably two, revolving accts is important for rebuilding.  The dilimma is that with prior, unpaid COs still of record, it is difficult to secure higher CLs or good terms.

Many will obtain secured cards to begin building, and move up to usecured and higher CL cards as a decent history of use of revolving is demonstrated.

[Kristy011]

So basically I should pay off everything regardless if it raises my score, right?  that way when people do look at my report, at least I had enough decensy to pay then back once im back on my feet(which i am, financially) And hope they delete it from my report.

[webhopper]

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@Kristy011 wrote:

So basically I should pay off everything regardless if it raises my score, right?  that way when people do look at my report, at least I had enough decensy to pay then back once im back on my feet(which i am, financially) And hope they delete it from my report.

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I agree 100%... I had credit problems in the past, but I was able to pay everthing off, 

After everything was paid off, I started the GW process and GWed for what seemed like forever, but eventually ended up with a fairly clean report... this opened the door to becoming a homeowner, being able to finance a car that was sorely needed to start a new job...

I think it makes an underwriter look at you a little bit differently if things are paid off

[InvincibleSummer3]

I agree with Robert in that paying it off is important. But for me, I've always at least attempted a PFD first and foremost. If they say no, then I pay it and try to GW (good will - basically a letter that asks them to please remove the tradeline as a nice thing to do for a fellow human being) it later.

I have been told on these very forums, though, that that can cause a drop in score, at least temporarily. If you're not looking to have a "credit event", meaning you're not applying for any loans or accounts, then it won't be a big deal. But it's always a good idea to plan ahead so that an old tradeline doesn't update somehow right before you're planning to apply for something. Last but not least - and this is BIG - I want to buy a house in the next few years, so I'm working on paying off all the old debt. I know that they'll likely ask if I have any unpaid debt, and I want to be able to say no, that I've paid everything possible and am heading into homeownership with a clean slate.

FWIW, I didn't see a score move either way when I paid the old debts. I've only seen increases in the instances where the tradeline was removed completely.

[Kristy011]

Thank You! I actually talked to a myfico representative and she gave me GREAT advice as well, on what to do.