Need help figuring out impact of this payoff (Updated: Score went UP. )

[Anonymous]

my husband has a open loan that went into default in 2015. It has been reporting monthly as open defaulted/charge off. It is not a collection account as it is still with the OC in their internal collection department. The total balance is $10,300. We are making a payment and settling on this account so the account will update next month as paid (possible paid charge off). Aside from one collection this is his highest unpaid balance. We are wondering what to expect once its paid as far as credit score increase. How much can we assume it will go up based on this account being paid off? 

Any help or insight would be appreciated. 

[Anonymous]

Does anyone have any experience with paying off a large account in delinquency? Its 1 of 2 total accounts. Hoping to get an idea of what the impact will be on his credit. 

[RobertEG]

Once paid, it will thereafter have a paid (i.e., non-delinquent) current status, which means that any further updates after the final update to show paid will no longer extend the period of delinquency since initial delinquency, and thus no longer affect scoring under payment history.

Sicne they have been making regular updates, the current period since initial delinquency is up to date, and thus the final reporting will have negligible extension of the overall period of delinquency.

Loans are not included in % util scoring, and thus update to $0 will not improve your % util scoring.

Remaining balance on installment debt has a small impact.

Overall, I would not expect much in the way of score improvement by paying a delinquent installment loan that has been making regular monthly reporting.

[Anonymous]

I have seen most of the time collections, charge off's hurt your score when you pay them due to bring the age newer not sure why they go down but everytime it does. 

[Anonymous]

Well at least we will know not to expect much. Hopefully at least NOT a decline. We have to pay this charge off since it is preventing us from buying a house. We were denied last year because the risk of being sued on an account with such a high balance was too risky. I would want it removed except that its his oldest tradeline from 2007. If we removed it his oldest tradeline would drop to 7ish years as his next oldest account is from 2013. I figured that would hurt us more. 

[Anonymous]

I just wanted to update on this thread for anyone who may face the same question. We paid the account off (settled for 1500 less) and while it hasnt reported as paid yet (it will report paid next month after the 21 days we can retract the payment with the bank expires), but it reported as "faiiled to pay" with a new balance that comps our payment and his fico 8 score went up 7pts but his mortgage score went up 24pts. This is just through experian as that is the only regular monthly report we get aside from MyFICO (which hasnt updated yet). This is very good news and we are hoping to see another increase next month when they report it as paid $0 balance.