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Reduce util or pay off CO?

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rubicon
Regular Contributor

Reduce util or pay off CO?

My util is at 68% (7k) and I have 1 CO for $688 but it is reporting each month as a late. I contacted the collection company for a pfd and they said no and offered me a settlement of like $500. I have been paying down my util like mad so that I can then request cli's and as a result have two of my cards down to zero and can pay another two cards down to zero in a few days. My question is should I continue to first focus on getting my util down so I can continue growing my credit lines or pay this CO and thus stop the late pays that appear. Additionally, once I pay this CO is it worthwhile to then try to dispute it after it is marked as paid and zero balance?

Thanks guys
Starting FICO: 5/19/16 EX-586, EQ-555, TU-545
FICO 7/22/16 EX-652, EQ-636, TU-589
FICO 8/22/16 EX-659 EQ-628 TU-612
FICO 10/27/20 EX-687, EQ-664, TU-672
FICO 6/14/23 EX-707 EQ-698 TU-712
8 REPLIES 8
rubicon
Regular Contributor

Re: Reduce util or pay off CO?

Also how can this company report late payments on me monthly when I never had an agreement with them. Does that mean if I make a $20 payment to them each month that they have to report it as on time?
Starting FICO: 5/19/16 EX-586, EQ-555, TU-545
FICO 7/22/16 EX-652, EQ-636, TU-589
FICO 8/22/16 EX-659 EQ-628 TU-612
FICO 10/27/20 EX-687, EQ-664, TU-672
FICO 6/14/23 EX-707 EQ-698 TU-712
Message 2 of 9
rmduhon
Valued Contributor

Re: Reduce util or pay off CO?

I'd pay the charge off first because by reporting as late every month it's keeping your scores down. If they won't PFD then GW letters after its paid.
Message 3 of 9
Anonymous
Not applicable

Re: Reduce util or pay off CO?

If it's still reporting as a charged off account with a balance and not a collection yet it's part of your utilization so technically paying it will do both reduce utilization and take care of the CO.
Message 4 of 9
rubicon
Regular Contributor

Re: Reduce util or pay off CO?

It is in fact reporting as a collection...sorry for the misleadingly info.
Starting FICO: 5/19/16 EX-586, EQ-555, TU-545
FICO 7/22/16 EX-652, EQ-636, TU-589
FICO 8/22/16 EX-659 EQ-628 TU-612
FICO 10/27/20 EX-687, EQ-664, TU-672
FICO 6/14/23 EX-707 EQ-698 TU-712
Message 5 of 9
Anonymous
Not applicable

Re: Reduce util or pay off CO?


@rubicon wrote:
Also how can this company report late payments on me monthly when I never had an agreement with them. Does that mean if I make a $20 payment to them each month that they have to report it as on time?

It is reporting that it is still derogatory, which is being handled as being 'late'. This is because it is late. It was due a long time ago, and they have collection authority meaning that when they sent you a bill it was 'due on receipt'. There are no terms with you, no, because they are not extending you credit. The agreement they have with you does not need a contract from you, as you owe the debt.

 

With that being said, you should pay them off. Yes, reducing your util will have a more immediate benefit to your score, but you aren't near maxed, so as long as you keep chipping away at your balance for more than the minimum payment, you are handling those correctly. 

 

If you have any goals to get loans that require underwriting, both your util and outstanding past-due debt will become important. The sooner you get rid of the collections, the sooner they will start to be in the rear-view mirror.

 

Once those are paid off, continue working on getting your util down to that less than 9% overall. Keep in mind that even less than 30% is going to be a decent bump.

Message 6 of 9
RobertEG
Legendary Contributor

Re: Reduce util or pay off CO?

Debt collectors do not bill consumers, and do not report monthly delinquencies to a CRA.

There is no billing due date upon which they can calcualate a reportable length of a delinquency to a CRA.

Only the OC can report monthly lates, and can continue to do so, even if they have reported a charge-off.

 

While debt collectors dont explicitly report monthly delinquencies, if they are making regular monthly updated reporting, then in the eyes of FICO, they are making continued, updated reporting that the debt remains unpaid, and thus the period of "delinquency" is now longer.  Thus, while not explicitly reporting a monthly 180+ late, they are effectively reporting extended period of an unpaid, delinquent debt that does effect scoring.

 

If you pay the collection, you stop monthly unpdating that informs that the debt remains unpaid. 

A final factor would be whether the debt is still within SOL.

 

All things considered, since % util is not itself a derog, and can be reduced at any future time, I would recommend paying the debt that is now charged-off and under collection.

Paying the collection may also improve chances of the later to be sought CLIs.

 

Message 7 of 9
Anonymous
Not applicable

Re: Reduce util or pay off CO?


@RobertEG wrote:

Debt collectors do not bill consumers, and do not report monthly delinquencies to a CRA.

There is no billing due date upon which they can calcualate a reportable length of a delinquency to a CRA.

Only the OC can report monthly lates, and can continue to do so, even if they have reported a charge-off.

 

While debt collectors dont explicitly report monthly delinquencies, if they are making regular monthly updated reporting, then in the eyes of FICO, they are making continued, updated reporting that the debt remains unpaid, and thus the period of "delinquency" is now longer.  Thus, while not explicitly reporting a monthly 180+ late, they are effectively reporting extended period of an unpaid, delinquent debt that does effect scoring.

 

If you pay the collection, you stop monthly unpdating that informs that the debt remains unpaid. 

A final factor would be whether the debt is still within SOL.

 

All things considered, since % util is not itself a derog, and can be reduced at any future time, I would recommend paying the debt that is now charged-off and under collection.

Paying the collection may also improve chances of the later to be sought CLIs.

 


This is not necessarily true - the CA can update the account monthly with a CA status and the CRAs translate that to a late recency of that update (ie 1 month since last late). 

Message 8 of 9
rubicon
Regular Contributor

Re: Reduce util or pay off CO?

I appreciate everyone's feedback...I'm definitely taking monthly lates but only on experian and the impact varies wildly between different FAKOS and my actual fico...as much as i would rather tackle my util I'm going to suck it up and pay this derog. They didn't offer me much in terms of settlement as they want me to pay around 90% of the original debt but this is my only derog and I've got to do something about it as it will take about 5 years before it falls off.
Starting FICO: 5/19/16 EX-586, EQ-555, TU-545
FICO 7/22/16 EX-652, EQ-636, TU-589
FICO 8/22/16 EX-659 EQ-628 TU-612
FICO 10/27/20 EX-687, EQ-664, TU-672
FICO 6/14/23 EX-707 EQ-698 TU-712
Message 9 of 9
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