If you can pay Cap One in full, do it.
1. Cap One will officially close the account, preventing any future updates to the bureaus. An unpaid charge-off may be continuously updated as late by the original creditor, making the charge-off look "fresh". Paying it will reflect a closed, paid charge-off status which will allow the derogatory account to age and lessen the damage to your score over time.
2. Paying will prevent any further collection activity. Cap One may sell or transfer the unpaid debt to a collection agency at anytime within the Statute of Limitations which could result in a collection item popping up on your reports - in addition to the charge-off. You could also be sued (though rare for a small amount) and end up with a judgement on your reports.
3. The balance owed is currently being factored into your credit utilization. Paying it to zero will eliminate any individual utilization score dings.
4. A paid charge-off looks way better than an unpaid charge-off upon a lender's manual review.
5. You may continue to send goodwill letters after paying the debt in hopes that they land in the hands of some sympathetic soul willing to remove it for you.
Welcome to the forum!
1. Cap One will officially close the account, preventing any future updates to the bureaus. An unpaid charge-off may be continuously updated as late by the original creditor, making the charge-off look "fresh". Paying it will reflect a closed, paid charge-off status which will allow the derogatory account to age and lessen the damage to your score over time.
2. Paying will prevent any further collection activity. Cap One may sell or transfer the unpaid debt to a collection agency at anytime within the Statute of Limitations which could result in a collection item popping up on your reports - in addition to the charge-off. You could also be sued (though rare for a small amount) and end up with a judgement on your reports.
3. The balance owed is currently being factored into your credit utilization. Paying it to zero will eliminate any individual utilization score dings.
4. A paid charge-off looks way better than an unpaid charge-off upon a lender's manual review.
5. You may continue to send goodwill letters after paying the debt in hopes that they land in the hands of some sympathetic soul willing to remove it for you.
Welcome to the forum!
@Donna71281:
Check the statute of limitations (SOL) for debt collection in your state. It generally spans 4-6 years on average, but it's state specific. If you're still within SOL, you're at risk for further collection attempts. They can also sell or transfer the debt - which leaves you prey to collection agencies.
Also, just because they haven't updated recently, doesn't mean the never will again. They can update sporadically so long as they own the debt.
And consider utilization. How high is the balance owed? Is the account still showing the credit limit, or has the limit been reduced to 0? If its been reduced to 0, then you are at 100+ util for that card. If the limit is still noted, util may just be high, or even over the limit due to excess fees, for that card. Either way, it's factored into your score.
My personal experience - I had a charge-off, also from 2014, last updated Sept 2015, and reporting 113% individual util. I paid it in Sept 2017 and my score jumped 27 points just from the reduction in util - though this big increase was largly because I had no other open lines of revolving credit at the time, so this charge-off was the only credit limit used to gauge util.
I also now have zero concerns about a collections popping up on my reports.
My advice when it comes to charge-off debt still owned by the original creditor is always to just pay / settle it. You'll be better off in the long run.
Side Note: payment in full is better (on paper) than a settlement. If you loaned money to a friend, wouldn't you be more willing to do it a second time if they actually paid back all the money borrowed as opposed to a portion of it? That's how a (now former) underwriter friend of mine explained to me how underwriters tend to think as they do manual report reviews. This charge-off will be on your reports til what, 2020/2021? Do you really want to go the next few years with indisputable proof that you *refuse* to pay your debts on your reports? Because that is how it will likely be interpreted (and that sucks).
Check the statute of limitations (SOL) for debt collection in your state. It generally spans 4-6 years on average, but it's state specific. If you're still within SOL, you're at risk for further collection attempts. They can also sell or transfer the debt - which leaves you prey to collection agencies.
Also, just because they haven't updated recently, doesn't mean the never will again. They can update sporadically so long as they own the debt.
And consider utilization. How high is the balance owed? Is the account still showing the credit limit, or has the limit been reduced to 0? If its been reduced to 0, then you are at 100+ util for that card. If the limit is still noted, util may just be high, or even over the limit due to excess fees, for that card. Either way, it's factored into your score.
My personal experience - I had a charge-off, also from 2014, last updated Sept 2015, and reporting 113% individual util. I paid it in Sept 2017 and my score jumped 27 points just from the reduction in util - though this big increase was largly because I had no other open lines of revolving credit at the time, so this charge-off was the only credit limit used to gauge util.
I also now have zero concerns about a collections popping up on my reports.
My advice when it comes to charge-off debt still owned by the original creditor is always to just pay / settle it. You'll be better off in the long run.
Side Note: payment in full is better (on paper) than a settlement. If you loaned money to a friend, wouldn't you be more willing to do it a second time if they actually paid back all the money borrowed as opposed to a portion of it? That's how a (now former) underwriter friend of mine explained to me how underwriters tend to think as they do manual report reviews. This charge-off will be on your reports til what, 2020/2021? Do you really want to go the next few years with indisputable proof that you *refuse* to pay your debts on your reports? Because that is how it will likely be interpreted (and that sucks).