Scores only drop when settling if the update to reflect payment is the first update to the tradeline in a while. When a derogatory is left stagnant, scores begin to recover as it ages, then, it's updated - now no longer "aged" and scores take a bit of a hit.
It also matters how paying chargeoff accounts affect your revolving util. Outstanding chargeoff balances are factored into your overall utilization, causing further damage to your scores. Once paid, the account is updated to reflect $0 balance - eliminating that percentage of utilization. If the reduction of utilization causes your overall util to drop below a threshold for scoring you'll gain points.
So - in the case where a derogatory tradeline has not been updated consistently, and util after payment is not reduced significantly (perhaps a small outstanding balance that did not have a large affect on aggregate util), then the points lost from the update may be more than any points gained from reducing util, resulting in a net decrease in score. If points gained from the utilization reduction exceeds points lost from the update, the result is a net positive score increase. Or, points lost from the update and points gained from the util reduction are near equal - so it's a wash, scorewise.
In the case where the tradeline has been updated consistently by the creditor, then points lost from the final update should be minimal - so points gained from decreased util generally exceeds points lost, resulting in a net positive score increase.
Your charge off balances are higher than your total open credit limit - so the utilization is killing you. I think you'll fare well once those outstanding balances are reduced to zero.
Either way, you don't have much choice as most mortgages lenders will require negative debt be paid to secure the loan.
The lates on your auto loan are also surpressing your scores and will continue to do so with heavy penalty til the most recent ages beyond 2 years - then the penalty will lessen a bit.
I think you should pay the other chargeoff and see where your scores (specifically, mortgage scores) land prior to throwing money at any current loans. Reassess your options for increasing scores after the chargeoffs reflect payment.
Welcome to the forums!
Thank you so much! I will pay the other settlement offer today. I would rather pay the settlement offer than be sued for the full balance or worse not be eligible for a mortgage in the near future. I will report back once it is reflected on my credit report. I don’t want to spend a lot of my savings if it won’t help my situation. Now the dreadful waiting game 
@Anonymous wrote:Thank you so much! I will pay the other settlement offer today. I would rather pay the settlement offer than be sued for the full balance or worse not be eligible for a mortgage in the near future. I will report back once it is reflected on my credit report. I don’t want to spend a lot of my savings if it won’t help my situation. Now the dreadful waiting game
I think that's a good plan. Good luck!!
That is fantastic! Congratulations - and kudos to NFCU!! Seems the stars are certainly aligned in your favor...
@Anonymous wrote:I have been getting overwhelmed with my credit scores and trying to purchase a home. I was recently denied for a mortgage despite a fairly low DTI and more than the required 3.5% down due to my credit score and some charges off. Can anyone advise if & when I will see an increase in my mortgage scores after paying a settlement offer. Here’s my profile.
Positive accounts (never late)
capial one cc- $500 CL $3 balance
capital one cc- $300 CL $0 balance
citibank cc- $1100 CL $0 balance
citibank cc- $300 CL $0 balance
student Loan - $1600 balance
student Loan- $950 balance
negative accounts
NFCU auto loan opened 7/2015 (9 late pays last late pay 01/2019) $14K balance
NFCU CC #1- Charge off $11,000 (settlement offer $3500- have not paid yet- delinquent as of 8/2018)
NFCU CC #2 - Charge off $11,000 ( paid settlement yesterday of $3400 delinquent as of 7/2018)
debt
car payment $570 month
student loan 1- $49/mo
student loan 2- $50/month
salary 90K/year
I saved $40K for a down payment and was told when I had a 580 Middle score I would need a 620. Now that I have a 620- I was denied for a mortgage and was told that I need to get my middle score to a 640 or higher. I’m so frustrated and I don’t know what to do. Yesterday, I paid a settlement on 1 credit card that NFCU offered me and now after reading about credit scores dropping when settling, I don’t know what to do and if I just inadvertently set myself back in this mortgage process. I am dipping into my down payment money to clean up my credit report but am I going about this wrong? I’m trying to apply for an FHA loan for $270K- I was going to pay the second settlement offer for the other credit card today but now I’m not so sure.
For all of you experts, what should I do to get my scores closer to 700?
Pay off student loans in full? Settle credit card? Pay down the principal on my auto Loan? Do all three?
Current mortgage fico
TU 622
EQ 669
EX 587 ( they are reporting a collection account from Moutain run solutions (VIVINT) $2000 06/2019 that I am disputing)
Help!! Thanks in advance
As far as I know any settlements will probably wind up as long term negatives in your reports. Sorry.
@Anonymous wrote:Here’s an update after only one day!! Experian score increased 51 points - to 638 per their website. The two charged off CC that I settled are deleted off of my credit report with them. I can’t believe NFCU did that. TU & EQ have not updated yet but I will order the mortgage scores again after I get the notification it has been updated!
Wow. You are very lucky. Just another example of why NFCU is the best.