Help! Do I pay off old cc debt or let it fall off?

[Anonymous]

At the beginning of my rebuilding journey here. After detroying my credit with years of neglect I am finally in a position to get back on track. I have recently paid off all collection accounts, and have my chargeoffs down to a single account. It is a credit card account with a $525 balance that went delinquent exactly 6 years ago.

I current have no credit cards to help with utilization and % of debt. Just qualified for a CapOne Secured card!

My question is: Should I wait a year and let the $525 cc chargeoff fall off my credit report? Or should I pay it now so my total chargeoff debt is $0? Then by keeping my secured card paid each month with a low balance I should see a healthy credit score jump? That would leave only student loans and a couple small revolving accounts I have in good standing.

The MyFico Simulator suggests paying off that $525 would help out a lot....but I really don't know the best decision here. Thank you all for the assistance! 

[mja1970]

It's really up to you.  If you're able to wait it out and don't have any big purchases planned in the next year, such as a home or a car, I would be inclined to just let it fall off.  But, if you just want to get it off of there sooner rather than later and don't want to wait for that score jump, I would contact the CA and see if they will agree to settle for a smaller amount (almost all of them will) and do a PFD, which would get it deleted within 30-45 days of paying it.

[heynongman]

Thanks for the reply. If they settle for less but won't do a PFD would you still do it?

I don't have an upcoming home or car purchase that makes this essential, but I'm really motivated to focus on my score and get it out of the dumps sooner rather than later. Whatever is best to bump my score the fastest

[Anonymous]

Thanks for the reply. If they settle for less but won't do a PFD would you still do it?

I don't have an upcoming home or car purchase that makes this essential, but I'm really motivated to focus on my score and get it out of the dumps sooner rather than later. Whatever is best to bump my score the fastest...

[mja1970]

I would definitely contact the CA then and ask them to settle for less and agree to deletion once paid.  You might be able to get it down to about 50% of that amount.  That should give you a score increase within 30-45 days.  Even if they don't agree to delete, they will still report the account as paid and closed, which will look a heck of a lot better than an open/active collection account.  It won't help your score nearly as much as a deletion would, though.  

Honestly, if it were me and I didn't have any home or auto purchases planned in the next year, I would just let it fall off.  You can even apply for early exclusion with the credit bureaus, which, if approved, would allow you have it deleted several months early.

[OmarGB9]

Well there are a couple of things to consider here. First, you said it is 6 years old. Do you know the exact DOFD (Date of First Delinquency, or when the account first defaulted and never got current again, leading to a subsequent charge off)? If it was in early 2015 or even in 2014, you may qualify for early exclusion (EE) with the credit bureaus. TU does 6 months early, and EQ and EX 1 month early. You can find this Date in your reports if you pull the full report from annualcreditreport.com.

Secondly, is it updating monthly? If it's not, then you could possibly wait it out/wait until you qualify for early exclusion. If it *is* updating monthly, then you'd have to consider whether to spend that money when it's so close to falling off, as well as whether you want that more immediate (potential) score boost.