Pay in Full or Pay for Delete

[moosemoney]

I have been working diligently on improving my FICO scores and the information in my report, and have increased my TU FICO 8 by 140 points in the last 12 months.

I've gotten all but 2 derogatories off my report, so those are my main focus right now. My question is about one of those.

It's an old credit card that was "charged off" but never sent to collections. Account opened 05/05/2005, Date of First Delinquency 04/01/2014.

According to my actual credit report from Experian, my oldest account is 16 years + a few months, and my average age of accounts is 8 years + some months (this is all accounts showing on my report). According to Credit Karma my oldest account is 10 years + a few months, and my average age of accounts is 3 years + some months (this is just current/active accounts).

Would I be better off paying this and leaving it on my report so it shows as "charged off $0 balance," or attempting to have the TL deleted entirely? And if I do pay it and leave it on my report, is there a big difference between it reporting "paid in full" and "settled for less than originally owed?"  

I personally would like to have it deleted entirely so I don't have that "charge off" showing at all (if they'll let me), but if it'll be better overall to keep it I may do just that.

[aerospaqe23]

Chargeoffs are one of the worst things to have on your report, I would attempt to delete the tradeline.

[moosemoney]

That's what I thought. I had read that sometimes it is better to show that you paid it, but that didn't sound right to me. Thank you.

[RobertEG]

The creditor can continue to report delinquency of the debt by reporting a current status of CO, and continuing to update the prior payment history profile for each month the debt remained unpaid.  The updates affect scoring by effectively extending the reported time of delinquency since the initial date of delinquency.

Once you pay the debt, the current status for any updated reporting can no longer show a delinquency status, and the payment history profile cannot be updated to show delinquency, such as CO, for any month after the debt was paid.

Thus, paying does not remove the effect of prior delinquencies reported before you paid, but it terminates updates showing a continued, later date of delinquency.  It thus permits the prior derog impact to begin to age in scoring effect.

[moosemoney]

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@RobertEG wrote:

The creditor can continue to report delinquency of the debt by reporting a current status of CO, and continuing to update the prior payment history profile for each month the debt remained unpaid.  The updates affect scoring by effectively extending the reported time of delinquency since the initial date of delinquency.

Once you pay the debt, the current status for any updated reporting can no longer show a delinquency status, and the payment history profile cannot be updated to show delinquency, such as CO, for any month after the debt was paid.

Thus, paying does not remove the effect of prior delinquencies reported before you paid, but it terminates updates showing a continued, later date of delinquency.  It thus permits the prior derog impact to begin to age in scoring effect.

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You're too smart for me.

[Anonymous]

LOL at the gif...

[austingal]

I would pay for delete and get that turkey off of your reports already!

[bass_playr]

He is a bit of genius, isn't he?  LOL

I believe what he's saying is that an unpaid collection can continue to do harm to your score, because the status as "balance unpaid" still remains the current status.  I believe he's also saying that once you pay the balance, it's still a negative mark on your credit, but over time it's negative effect will decrease because it has a zero balance.  In other words, owing money still can cause more harm, generally speaking, because that creditor can continue to report through the whole 7.5 years that the account is still in delinquent status.  Once you pay it off, it's no longer remaining in delinquent status because you paid the balance off.  The old negatives in payment history will still harm your score but the older they get, the less effect they will likely have on your score.  I hope I did Robert justice on that lol