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Paying Baddies Affecting Reporting/Scores?

Paying Baddies Affecting Reporting/Scores?

I have an unpaid charge off from 4 years ago. It is still with the original creditor (knock on wood), and I am debating paying this CO in settlemnt or PIF. 

My concern is, right now the "status updated" and "balance updated" date is showing 2015. If I settle or PIF this account, the "status updated" and "balance updated" fields will inevitably be updated to 2019. How does this affect reporting and my credit scores? Does it look worse/the same/better? The account will still fall off after 7-7.5 years, correct? 

 

I am just trying to weigh my options between just letting sleeping dogs lie and hope for the best, or paying it off with unintended consequences? 

Message 1 of 9
8 REPLIES 8
ScooterMcDoodlebutt
Established Contributor

Re: Paying Baddies Affecting Reporting/Scores?

A paid charge-off/collection is always better than an unpaid one. If you pay it that does not mean that the clock will restart & that it will stay on for 7 more years- the DoFD sets the timeframe for the 7 years. Resetting the clock applies to SOL, which if you are going to PIF or settle makes it moot...







Message 2 of 9

Re: Paying Baddies Affecting Reporting/Scores?

Thanks - good to know, and along the lines of what I was thinking.

 

If I PIF or settle, how do you anticipate that would affect my FICO score? I know it looks better to have it paid, but am worried about an initial/continued drop in my scores to having recent activity on an account that hasn't been touched in so long. Thanks and hope that made sense! 

Message 3 of 9
caraxoxo
Valued Member

Re: Paying Baddies Affecting Reporting/Scores?

I recently paid an Utility bill collection through Penn and it updated to paid in full $0 balance. My score didn't drop or raise. Experian states it will drop off in 2024.. which that's what it said before so paying it didn't do anything but update my report. 

All I'm trying to do is pay off collections and keep a low DTI.
Message 4 of 9

Re: Paying Baddies Affecting Reporting/Scores?


@ScooterMcDoodlebutt wrote:

A paid charge-off/collection is always better than an unpaid one. If you pay it that does not mean that the clock will restart & that it will stay on for 7 more years- the DoFD sets the timeframe for the 7 years. Resetting the clock applies to SOL, which if you are going to PIF or settle makes it moot...



Thanks - good to know, and along the lines of what I was thinking.

 

If I PIF or settle, how do you anticipate that would affect my FICO score? I know it looks better to have it paid, but am worried about an initial/continued drop in my scores to having recent activity on an account that hasn't been touched in so long. Thanks and hope that made sense! 

Message 5 of 9
sjt
Senior Contributor

Re: Paying Baddies Affecting Reporting/Scores?


@caraxoxo wrote:

I recently paid an Utility bill collection through Penn and it updated to paid in full $0 balance. My score didn't drop or raise. Experian states it will drop off in 2024.. which that's what it said before so paying it didn't do anything but update my report. 


Collections are different then bank charge off accounts still owned by the original bank.

American Express: Platinum Charge, Optima, Business Gold, Delta Business Platinum
Barclays: Arrival+ WEMC
Capital One: Savor WEMC, Venture VS
Chase: Freedom U VS, CSR VI
Citibank: AAdvantage Platinum WEMC
Elan/US Bank: Fidelity VS
Credit Union: Rewards Visa
FICO 08: (2.20.21) EX: 838 / EQ: 846 / TU: 843
Message 6 of 9
sjt
Senior Contributor

Re: Paying Baddies Affecting Reporting/Scores?


@Creditinallthewrongplaces wrote:

I have an unpaid charge off from 4 years ago. It is still with the original creditor (knock on wood), and I am debating paying this CO in settlemnt or PIF. 

My concern is, right now the "status updated" and "balance updated" date is showing 2015. If I settle or PIF this account, the "status updated" and "balance updated" fields will inevitably be updated to 2019. How does this affect reporting and my credit scores? Does it look worse/the same/better? The account will still fall off after 7-7.5 years, correct? 

 

I am just trying to weigh my options between just letting sleeping dogs lie and hope for the best, or paying it off with unintended consequences? 


If all the charge off accounts are still with the original creditor chances are the creditor is reporting monthly and that keeps your score low. If they pay or settle with them, it will update to paid/settled $0 balance. That will stop the delinquent reporting of those accounts. Your score will see a nice bump.

American Express: Platinum Charge, Optima, Business Gold, Delta Business Platinum
Barclays: Arrival+ WEMC
Capital One: Savor WEMC, Venture VS
Chase: Freedom U VS, CSR VI
Citibank: AAdvantage Platinum WEMC
Elan/US Bank: Fidelity VS
Credit Union: Rewards Visa
FICO 08: (2.20.21) EX: 838 / EQ: 846 / TU: 843
Message 7 of 9
sjt
Senior Contributor

Re: Paying Baddies Affecting Reporting/Scores?

The 7 years is based off of the DOFD, which never changes.

 

 

American Express: Platinum Charge, Optima, Business Gold, Delta Business Platinum
Barclays: Arrival+ WEMC
Capital One: Savor WEMC, Venture VS
Chase: Freedom U VS, CSR VI
Citibank: AAdvantage Platinum WEMC
Elan/US Bank: Fidelity VS
Credit Union: Rewards Visa
FICO 08: (2.20.21) EX: 838 / EQ: 846 / TU: 843
Message 8 of 9
RobertEG
Legendary Contributor

Re: Paying Baddies Affecting Reporting/Scores?

Just as with a creditor updating by reporting increase in monthly delinquency period from, for example, 60-days to 90-days late, whenever a creditor reports an update to the CRAs that continues to show a current delinquency status, that increases the reported period since initial delinquency, and affects scoring.

 

If the creditor ceases updated reporting after 2015, then yes, when you pay the debt and they update to show paid/settled, $0 balance, it extends the effective reported period of delinquency, and can affect scoring.  The good news is that after the update to show paid, no further updated reporting will continue to show a current delinquency status, and thus the derog scoring will begin to age.

 

No, it will not affect the credit report exclusion date, which as has been previously stated is based only on the reported DOFD, but I would not assume that the updating will have no score impact.

 

Apart from scoring, there are subjective, manual review issues.

Yes, paying, either in full or thru a settlment for less, looks much better, as it shows that you ultimately honor your debts.  In some cases, such as in a mortgage underwriting process, payment of delinquent debt could even be an underwriting requirment, but that varies.

 

You can attempt to mitigate or eliminate scoring implications by either first making a pay for deletion offer, which offers to pay in exchange for their agreement to delete either the reported derogs, such as the charge-off, or even the entire account upon receipt of the agreed payment.

You can also offer a settlement for less contingent upon their agreement not to report any reference to the debt having been settled for less.  The account will then appear the same as if it had been paid in full, which is preferable in any manual review.

Message 9 of 9
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