To pay or not to pay???

[Anonymous]

My husband & I are planning to finance a manufactured home in the next 6-12 months and obviously  need his FICO scores to be as high as possible as fast as possible. He has a First Premier card charge off due to fall off 3/2016 with a balance of $431.
FICO is saying he is using 100% of his revolving credit which is bringing his score down. Ive read where paying a charge off also brings the score down.
Which would be the wisest thing to do? Do we pay off the card and hope freeing up the revolving credit will compensate for his score dropping from paying it off?

I dont want to pay the amount to make his score go up then have it go back down because we paid a charge off.

[Anonymous]

If the TL is reporting and updating monthly his score should not be impacted by paying it.

To be at 100% utilization is killing his score.  Paying that off would most assuredly help his score.  Is this the only revolving he has?

FICO scores COs the same, paid or unpaid.  The score drop would come from it not being updated monthly.  For instance, if the last reported date was in 2010 and you pay it, the reported date would be the date it was reported paid, say, July 2013.  This would cause the score to drop due to not being updated in 3 years making it appear newer.

On the other hand, if the last reported date was July 2013 and you paid and it updated to Aug 2013, there should be no drop. 

[Anonymous]

Yes, it is the only revolving credit he has on his report. He was approved for a Capital 1 secured card that he is about to open though, would that be wise?

The last update is 11/2012 on the account.

[Anonymous]

Then by paying it he will more than likely suffer a score drop.  However, if that is his only revolving and is at 100% utilization, I would think, at a minimum, his score would do nothing either way.  Drop in utilization would off set the drop for updating.  YMMV.

Yes, he definitely will need another revolving.

How old is the TL?

[Anonymous]

I am not a credit expert by no means. I can offer some words on what I have dealt with the past several months.  A charge off is a charge off after a period of time the affect of that charge off does lessen from when it initially goes into that status.  Sometimes it is best to work out a arrangement to just pay it off and close that card.  Of course get it it writing that after you pay they agree to close the account and reflect as paid to the CRAs. If you are short on revolving debt you can get a secured card from Capital One. Of course length of credit history (total of your whole life) would take a small hit and a hit for inquiry but over a period of 3-4 months it would do more good than harm.  But as with anything in life credit scores and history are different for everyone I can just speak on what has worked for me. I have increased all three scores over 50 points each in the last 90 days.  Important thing also to remember is that many lenders wont lend to you if you have any outstanding debts that are in a charge off status. Simply waiting for something to fall off is not a bad thing if it was in 2 or 3 months but 3 years is a long time.  Start to fix it now and realize time and managing new credit carefully is the only thing to help you reach your goal. Accept that you may have to wait more than 6 or 12 months to buy your home.

[RobertEG]

My view....

The damage of a reported charge-off extends far beyond simple FICO impact.

Reporting of a charge-off is, in essence, the recordation in a consumer's credit file that a creditor has reached a determination that the consumer is not going to pay the letitimate debt.  A very negative determination.....

Upon manual review, as long as the reported charge-off remains unpaid, in my opinion, that statement becomes worse. It emphasizes that the creditor was correct, and that the consumer has no intent to pay the debt.  Hardly a condition that will entice future creditors to extend credit.

By paying, it shows that the consumer had prior hard times that have now been overcome, and the consumer did, in fact, make good.

It mitigates the prior view that the consumer stiffs bad debt.

Waiting until the CR exclusion period expires will of course remove the comment, but if credit is sought prior to that exclusion, it is, in my opinion, worth the $$ to mitigate that very negative comment.

[Anonymous]

Thank you all for your input. We are going to pay it off, open the Capital 1 card, and see where that takes us!

*fingers crossed*

[Anonymous]

it is 4 yrs old