Paying charged off debts pointless?

[Anonymous]

I recently applied for a FHA home loan with my wife and they told me not only was my score too low (620 was their requirement, i’m in low to mid 500’s across all three) and that my debt to income ratio was 55% (45% was their max)
I do have 6 charged off accounts affecting me negatively. I have two accounts with chase that I was able to get them to agree to settling (13k debt reduced to 1,300) but I’m probably already four years into this debt. They never said they would delete it. So Is my best bet to wait out the 7 years? I’ve disputed and all these accounts multiple times. Maybe I’m disputing wrong? It just get the remarks updated.

I have since been not using credit for anything except my car. I know I shouldn’t have let those accounts go for so long. I just want to move forward and make things right as well as get out of debt the right way.

I have a family now and This is holding me
Back. There must be some
Loop hole or technique I can use to my benefit before 2022 when it reaches 7 yr mark.

[Jnbmom]

If they are legtimate chargeoffs you have no grounds in disputing them.

You can try to get them to settle for lesser amounts if you have the money to pay for them, you can ask for pay for delete and some may do this and some may not. 

You can wait it out but you will still have a few years to wait.

Most  mortgage lenders want these things paid prior to approval as well.

Good luck

[Anonymous]

Thank You for your response. Well i’m worried that i’ll pay all the debt off and it will keep my credit score under 580 for FHA -620 for USAA
But when they look they will see no debts will this look favorable? Also if I pay the debts what happens to the non payment history?

[Anonymous]

Seems like I am in the same situation as you trying to get a mortgage. I’ll tell you pay the charge offs if you can. Especially if they are with the original creditors. I paid about 7 charge offs and only 2 have reported so far as them being paid with balances updated. My points have gone up average of 20-30 on all ficos

[Anonymous]

Ive been reading that a paid in full / settlement remark update on the credit file vs a deletion won’t help. I agree with you on seeing an icrease in score but it seems that lenders are using a different scoring system when looking at credit? Where as we are just seeing scores from monitoring services? I was going to try to settle with every account I have in charge off. I got chase to settle for less which makes up the bulk of my debt and we are at payments of $180 a month which right now I can’t afford to spend freely if it isn’t helping. Do you know why the other accounts you paid off are not reporting yet? Has it been over 30 days?

What happens to the clock if I start paying on debt and then default?

[RobertEG]

Legit reasons still remain for paying a delinquent debt even after it has become excluded from your credit report.

Credit report exclusion of derogatory reporting does not negate the debt.  It only prevents the CRA from continuing to show the negative information in normal credit reports they issue.  The continued existence of unpaid, delinquent debt can still become known by other means, such as a simple request for a listing of all unpaid, delinquent debt in any application for new credit.

Additionally, the credit report exclusion provisions of FCRA 605(a) are not absolute.  Under certain limited conditions, such as with respect to a consumer application for new credit in the amount of $150K or more, a creditor can still request and receive a full-file credit report that shows all information in the consumer's file, including adverse items that have normally become excluded.  See FCRA 605(b).

If the debt is revolving, then paying will also result in decreased % util, and thus, if the debt is high, result in improvement in your scoring of % util of revolving credit by update of the balance to $0.

Finally, up to the time that the reporting of continued delinquency becomes excluded, any update by the creditor that continues to show a continued delinquency status will affect scoring of the account since the period since initial delinquency continues to increase.

Paying can thus end delinquency status, and permit scoring of the delinquency to begin to decrease up to the time it eventually becomes excluded.

A technique to remove all negative scoring of delinquent accounts is to offer a pay for deletion to the creditor.

If they accept, you then obtain both discharge of the debt AND removal of the derogs from your credit report, and thus from scoring.

[sjt]

---

@Anonymous wrote:
Thank You for your response. Well i’m worried that i’ll pay all the debt off and it will keep my credit score under 580 for FHA -620 for USAA
But when they look they will see no debts will this look favorable? Also if I pay the debts what happens to the non payment history?

---

Couple of things:

When you pay or settle a charge off, it will increase your score. Especially if the Charge Offs are still owned by the original creditor. The original Creditor that still owns the CO debt will most likely report monthly (a charge with a balance)  and that supresses your score.

FHA not only requires a minimum score but they also require that all delinquent debts (unpaid charge offs and collections) are paid or settled before the loan is approved.

Credit rebuilding is two fold, 1) addressing delinquent obligations and 2) building credit. You should consider applying for a secured card to boost up your score.

Good Luck