Charge Off Hurting my utilization

[Anonymous]

So I have this Capital One charge off last payment made August 1st, 2010.  It shows that I am 137 percent utilization on the card.  It is set to time off my report in August. I just ran my FICO scrore from the free Disover Score Card and it is only 579.  And it shows my only bad thing being my utilization at 123 percent.  Obviously this is incorrect as I am not utilizing it and I was never over the limit when I had the card  I guess they added penalties after the charge-off.  My Vantage score shows very low utilization as it doesn't include this and I am authorized user on a 25k card with no balance.  How can I fix this. I applied and got a bunch of cards but none have hit the report yet.  And they are all 500 dollars or less. So my utilization will still be high if FICO doesn't use the 25k card. 

[Cherekas]

I am actually in the same situation. I have 2 cards that are charged off and I will be settling them both and paying them off next month. From my understanding from reading here on the boards, it will remain this way until you either settle the accounts or pay them in full. It will continue to report full balance but once paid, it will update to $0 and that's when your score will begin to recover. I'm looking forward to my score rebounding from this because its being suppressed and its not moving forward at all while they are still reporting utilization over 100%. 

[Anonymous]

I guess if that is the case I will just wait it out.  Capital One doesn't seem to care as they have just issued me two new cards.  

[MrsCHX]

As mentioned, the only "fix" is to pay it. Otherwise you can wait for it to fall off, like you mentioned. Of course this doesn't mean the debt disappears. 

You can ask TU for an early exclusion now. EX will likely remove it May 2017. EQ will be at the last minute. 

[RobertEG]

Paying the delinquent debt affects scores in two categories.

As a revolving account, payment will reduce your overall % util by removing the unpaid balance under that card.

That could be a significant scoring improvement.

As a delinquent account, any updated reporting they make that shows continued delinquency will effectively extend the impact of delinquency in your FICO scoring of payment history.  That applies regardless of whether the monthly delinquency status continues to be reported as the degree of monthly delinquency (e.g., 180+ late) or as a CO.

However, once you pay, the current status is no longer one of continued delinquency, and thus FICO begins to age the paid account.

If you do not need score improvement prior to exclusion of the charge-off or monthly delinquencies, then payment history impact of continued delinquency is merely academic.

That leaves only the continued reporting of a balance as scoring impact under your % util.

If the CRA removes the entire account based on the charge-off reaching its exclusion date, the negative impact of % util will also be removed.

However, if the CRA were to only remove the CO, then the continued delinquent balance would continue to be included in scoring of util.

CRA practice, based on the catch-all provision of FCRA 605(a)(5) mandating that any adverse item of information not listed in subsections 605(a)(1-4) must become excluded no later than 7 years from its date of occurence, is to remove accounts that remain delinquent upon exclusion of a charge-off on the account.

Thus, upon exclusion of the CO, you will likely see removal of the entire OC account, and thus removal of the adverse effect of the continued delinquency balance under scoring of your % util.

[Anonymous]

Thanks for the information everyone.  So Transunion is the only one you can request for Early Exclusion and the other two will just take it off when they take it off?  I have my only other deliquent card still left on my report to come off in August as well.  That one reports zero balance. I don't understand why one has zero balance and the other is over the limit. 

[RobertEG]

A creditor must update their reporting of current balance to show $0 debt balance if they sell the delinquent debt.

Showing of a $0 balance under an OC account does not mean the debt was paid, it means that there is no longer a debt due to that creditor.

There can be a period of time when a consumer's credit report can show no debt balance even if a debt remains delinquent and unpaid.

If/when the purchasing party reports their collection on the debt, their reported balance will then reflect both the amount they are authorized to attempt to collect and their ownership of that debt.

However, FICO does not include the reported balance of a collection in your % util scoring, so if an OC sells the debt and a debt collector thereafter reports a collection on that debt, it is not included in your scoring under % util.

Since a collection has the same credit report exclusion date as a charge-off, then once the CO has been excluded, there should no longer be an reported collection on that debt.

[Cherekas]

Robert,

Do you know how long it takes to recover from a charge off on your file? Or Is it just a matter of time with it aging in the fico scoring model? 

[RobertEG]

It depends upon whether or not you have paid the debt that was subject to the charge-off.

Just as with other delinquencies that remain unpaid, such as a 30-late becoming a 60-late, and so on, when a creditor updates their reporting to positively state that the current status remains a delinquency status (either a level of monthly delinquency or a CO), that is effectively treated by FICO as increased period of delinquent debt, and scored as such.  However, once the debt is paid, there are no longer monthly updates reporting continued delinquency, and FICO then begins to age the effect of the prior derog status.

Credit report exclusion terminates entirely the effect of any CO no later than 7 years plus 180 days from the DOFD.

The mandated exclusion of any reference to the CO prevents any updates from being included in your credit report, and thus your scoring.

[Cherekas]

Thank you for the information. I will have both my charge offs paid off by next month and I'm hoping it will certainly boost my score. So the question applies to paid charge offs. They arent going to age off my report until 2020. So to move forward now, I know that paying them is in my best interest for rebuilding instead of waiting 3 more years.