Charge Off Question

[cyrusvalentino]

I have a charged off Bank of America account that has been reporting monthly as a charge off. I settled the debt with Bank of America, but now I’m curious how this will immediately and in the future affect my credit.

Also I have one other charge off with Syncrony bank for Amazon, if I were to pay off this one that is updated quarterly as charged off what would the affects be? Also does it matter with charge offs such as these two if I PIF or Settle?

Thank you to anyone who can help with answers or their experiences.

[RobertEG]

Once a creditor has taken a charge-off, it can be reported to the CRA, and will remain in your credit report for approx 7 years from the date of first delinquency that preceded the charge-off (DOFD).  The CO is stored under your account history in both the payment history profile and/or date and amount of reported charge-off.  It can also be reported as the current delinquency status until it is paid, after which the current status will no longer be one of any delinquency.  However, paying does not remove the inclusion of the charge-off under your history profile, and it continues to affect scoring.

When initially paid, if the CO is on a revolving account, it reduces the current balance to $0 and removes the account from your % util scoring.

If the % util was high, then update to paid will have a postive effect on your % util scoring.

Paying will also prevent any subsequent reporting from continuing to show a delinquency status, which effectively continues to extend the lenght of the delinquency, and thus effect your payment history scoring of the impact of the charge-off.  AFter paying, the delinquency is terminated, and thus the CO begins to age in its impact.

If you settle vs pay in full, the creditor has the option of also reporting the special comment of paid/settled for less.

While not directly a scoring factor, it is in itself viewed as a negative comment in any manual review, as it informs others that you now have a reported history of not paying the entire debt that you accrue.  That means the creditor took a loss in having lended to you, and that is never a favorable comment when applying for new credit.

You can, if offering a settlement for less, include the stipulation that they agree not to report any reference to the debt having been settled for less.  If they agree, then your credit report will look the same in a manual review as if you had paid in full.

[cyrusvalentino]

I plan to write a goodwill/hardship letter and/or file a BBB complaint if that doesn’t work, which so far has been an aggressive method I’ve used to have derogatory information removed and has worked. Started with 10 derogatory marks a year ago down to 3 now which includes removal of charge offs, collections, late payments (30, 60, and 90), and a falsely reported charge off to bankruptcy.

Which does raise another question I know slightly off topic, but the account that was falsely reported as a bankruptcy was reported for over 2 years and negatively affected countless credit decisions. I managed to get the creditor to delete the reported account fully, but should I seek damages as allowed under FCRA?

The Bank of America is reporting monthly, with a CL of $500 and a balance of $687 so 139% utilization is reported. I had assumed it would help just not sure how much. The Amazon is similar; $900 limit w/ $1,335 reporter balance (148% utilization) which last reported in November (it appears they report quarterly). So should I pay off the Amazon and expect to see a score increase?

Thank you for responding and giving the helpful information it is greatly appreciated, learning more everyday about credit bureaus.

[RobertEG]

The FCRA specifically does not permit a consumer to bring civil action asserting liability for inaccurate credit reporting (i.e., a violation of FCRA 623(a)).  See FCRA 623(c).

In order not to place a disincentive on voluntary credit reporting to a CRA, congress specifically removed the ability of a consumer to bring their own civil action for violation of the FCRA if the asserted violation is inaccurate reporting under section 623(a).

Rather, the consumer must first file a dispute with the CRA, giving the furnisher the ability to either verify or correct the asserted inaccuracy before they are subject to any civil liability.  If the furnisher then verifies the accuracy, the consumer can initiate civil aciton based on lack of a reasonable investigation, but cannot bring civil action intially and directly based on the reporting per se.

[cyrusvalentino]

Didn't know that just went and read up more on the limitation of liability information in that subsection, thanks for the info Robert. What are your thoughts on me paying of the Amazon count as reference in my previous post? Should I? Do you think it would beneficial?

[Anonymous]

Kudos Robert!!!! Great information. 

Original Poster: You should pay off Amazon as well. 

PIF is better than settlement. It creates a good impression on your potential creditors. Most mortgage lenders refuse to issue loans when they see charged-off accounts or collection accounts on credit reports. So there is a reason why it's essential to pay off charge-off accounts. 

[Anonymous]

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@cyrusvalentinowrote:

Didn't know that just went and read up more on the limitation of liability information in that subsection, thanks for the info Robert. What are your thoughts on me paying of the Amazon count as reference in my previous post? Should I? Do you think it would beneficial?

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In your situation paying both off would gain points on the utilization I think. You are showing over 100% utilization now. And zero utilization is way better than 100%. Someone can correct me if I am wrong. 

[cyrusvalentino]

Thank you everyone for responding, I guess my final question is based on the DofD being 08/2013 (4 1/2 years) and balance being $1,335 what do you think would be an acceptable chargeoff payment amount to propose or accept? I know BOA was $413 (60%) of the $687 they wouldn't accept any less, despite talking to a supervisor.

[Anonymous]

I think $800 is a good amount to start with. Correct me if I am wrong.