Charge off - Paid status or Lower utilizations helps more?

[jdm12]

Does just paying off a charge off help your credit score, or is the credit score increasing only because of the lower credit utilization?

For example, could it be possible that you can pay off a charge off, but your credit score won't change if your CC utilization doesn't fall under one of the thresholds mentioned below?? 

Aggregate CC utilization thresholds: 8.9%, 28.9%, 48.9%, 68.9%, 88.9%
Individual CC utilization thresholds: 28.9%, 48.9%, 68.9%, 88.9%

Or does the mere act of paying off a charge off increase your credit score PLUS the chance that doing so will put you into a lower threshold, which would also trigger a credit score increase?

Lastly: Would a settlement for a charge off serve to zero out the balance? Or does the settlement simply lower what is still owed on the charged off account?

[pizzadude]

Your only FICO score gain would be in the context of lower revolving utilization as you described above.   The charged off account itself ( with any associated lates ) remains a derogatory account and hurts you equally whether it is paid or unpaid. 

[jdm12]

Would you know if it's still possible to get a paid charge off removed from a credit report? I'm working with a credit repair company, and I believe they were able to remove some charged off accounts. Not sure if paying for a charge off removes any chance of the charge off being removed??

Also if I settle on the charged off account, would the balance show up as $0? Or would it simply reduce the amount remaining on the charge off? I suppose the definition of settlemen implies it would be at $0, but wanted to be sure. Thank you!

[pizzadude]

It's certainly possible that credit repair companies promise they can have charged off accounts removed from credit reports but in my experience your odds of success with sending GW are probably about the same.   Most creditors will say no but it costs you nothing to ask and all you need is one person to say yes to your request. 

Settling the debt, even if it's for less, should result in a balance due of $0 on the account.

[jdm12]

Thank you pizzadude! Sounds good

Is a typical amount to settle for COs around 30% for debt that's outside the SOL?? For my case, it would drop next year on Oct 2025

I also have one CO that's now handled by a law firm, Madarich Law Group. Would it still work if I paid the OC, or am I stuck having to deal with the law firm?

[pizzadude]

It really varies by creditor in terms of what they'll take for a settlement.   You can certainly offer a lower amount and see what they come back with. 

You may want to search in the rebuilding forums for the name of the creditor if you don't want to share specifics.  With your other CO it will depend if the original creditor has sold the debt or only retained the law firm for collecting against it. 

[jdm12]

Happy to share specifics, I have these COs below. They are all going to drop around the October 2025 to Sept 2026 timeframe at the 7 year mark respectively for each CC. Would I likely have a better chance to settle for a lower percentage of the original debt since it's close to that 7 year mark? Is there anything noteworthy about these companies when it comes to paying off COs, are they difficult to deal with, etc?

• Capital One ($7720) - Drops from report on Sept 2026
• Chase ($6812) - Drops on Dec 2025
• Wells Fargo ($2206) - Drops April 2026
• Credit First National Association ($1631) - Drops Oct 2025

It is $18,369 total of debt. I was hoping that if I can pay around 30% then I can take care of this debt for about $5510.

[pizzadude]

Before you attempt to settle these, have you checked the SOL for your state of residence ?  I'd want to know where I stand in the event a creditor decides to take legal action on these debts. 

[jdm12]

I currently reside in the state of Florida, which seems to be 5 years for credit card debt (though I see some places saying 4 years - that's probably not correct, right?). I guess 5 years is the correct time period. However, I lived in Washington state during the time of default. If it's based on Washington state, the SOL would be 6 years from what I read. I also heard there credit card company can select any US state if they have a  "choice of law" and use that. So, I'm kind of confused when it comes to real SOL. I see how this is risky and thanks for bringing it up.  

I suppose the question is, would the CC company typically base the SOL on where their customer currently lives? I also read that the local court would handle any suits and the local court tends to use its own state's SOL.  In that case that would be Florida for 5 years, right?  

If it's 5 years, looks like the SOL is past for these two

• Credit First National Association ($1631) - Drops Oct 2025
• Chase ($6812) - Drops on Dec 2025

But these two are yet to be at 5 years past DoFD

• Capital One ($7720) - Drops from report on Sept 2026
• Wells Fargo ($2206) - Drops April 2026

Does this all sound about right?? Thanks again!!

[Rising_star]

So my fico score would go up if i do settle on a charged off account? 

Thanks for your feedback.