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After you pay a delinquent debt, the creditor (or debt collector) is required to promptly update their reporting to show a new current, non-delinqency status of paid, $0 balance. FCRA 623(a)(2).
That is the first reporting of a change in the status from being delinquent to a non-delinquency status.
It thus effectively updates the overall period of account delinquency that has expired since the date of initial delinquency, and thus similar to updating from, for example, 60-late to 90-late, effectively updates the total period of delinquency, which has score impact.
The good news is that after that initial update, and futher updates on their part will not extend the period of delinquency, as the first updated reporting changes the status to a non-delinquency status, and thus freezes the period of overall delinquency.
If it has been a substantial period since the credtior last updated their current status of CO, then their final update upon payment of the debt can have significant scoring impact. However, if they have been making regular monthly updates showing continued delinquency status, then the final update will not have significant scoring impact.
Similar scoring impacts apply to paying collections.
I'm in a similiar situation, where I'm trying to boost my score in the short term, with goal of overall better financial health. Is there a way to know in advance if paying charge offs will do this to your score? If it will, I may wait to pay off and just try to get my utilization down since i can't take the hit in the next 2-3 months.
@Anonymous wrote:I'm in a similiar situation, where I'm trying to boost my score in the short term, with goal of overall better financial health. Is there a way to know in advance if paying charge offs will do this to your score? If it will, I may wait to pay off and just try to get my utilization down since i can't take the hit in the next 2-3 months.
When was the last time it was updated? If it's updated every month already, then paying it off should not cause a drop. If it hasn't updated for a while, then it will likely cause a drop.
If it is updating each month then its already hitting you fresh every time it updates. So, getting that paid so it stops reporting will start to help your scores start to improve sooner.
@dynamicvb wrote:
@Anonymous wrote:I'm in a similiar situation, where I'm trying to boost my score in the short term, with goal of overall better financial health. Is there a way to know in advance if paying charge offs will do this to your score? If it will, I may wait to pay off and just try to get my utilization down since i can't take the hit in the next 2-3 months.
When was the last time it was updated? If it's updated every month already, then paying it off should not cause a drop. If it hasn't updated for a while, then it will likely cause a drop.
If it is updating each month then its already hitting you fresh every time it updates. So, getting that paid so it stops reporting will start to help your scores start to improve sooner.
Sorry for the naive question, but updating every month means it shows as a charge off every month since deliquent on my report, right?