Settled Accounts

[Anonymous]

Does settling an account have a negative impact on your score? I have three charge off's that I want to take care of but I'm not sure if I should settle them now, or wait and save up until I have enough to pay them off in full.

[Girlzilla88]

How expensive are they and when are they 'due' to fall off?!

[Anonymous]

They're $1400, 2500 and 2700. Unfortunately, they were just charged off the end of last year so they won't fall off anytime soon.

[Girlzilla88]

Ok yes so I would see about knocking them down one by one PFD Full payment, call me crazy lol but to me a paid settled amount that stays on your information for possibly the next 6 years (if they won't settle and delete) looks worse than if you can pay the full and get it off ASAP but with those amounts you definitely don't want to try to do them all at once.      (If you can of course go for it) but don't put yourself back into a worse position or the same position trying to do it all at once.

[SouthJamaica]

---

@Anonymous wrote:

Does settling an account have a negative impact on your score? I have three charge off's that I want to take care of but I'm not sure if I should settle them now, or wait and save up until I have enough to pay them off in full.

---

Yes it has a negative effect on your score, better to pay them in full.

Unless of course you can negotiate a pay-for-delete.

[Anonymous]

Where can I find information about this? Y’all are saying settled for less has a score penalty?

[Anonymous]

@Anonymous Whether paying a charge off has a negative or a positive score effect depends.

First it depends on whether it's regularly updating now. Because if it is, it is continuing to suppress your score. If it's not updating, it does not realize the delinquency has lengthened and does not penalize appropriately.

However it's also affecting your utilization. So when you pay it off you get a score increase from the utilization decrease, but you can have a decrease in score as it realizes the TPOD (total period of delinquency) has increased.

Now, if it's regularly updating and you pay it off, you're more likely to have a score increase because there's not gonna be much of a delinquency catch up period, so the utilization increase takes precedence.

Read this for more information:

https://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/General-Scoring-Primer-and-Version-8-Master-Thread-rev-5-17-20/m-p/6023348#M169679