Paid Chargeoff Drops score ....

[JayTee1]

I recently (last month, April) paid a chargeoff that was appearing on all three bureaus.  It was a $38 bill that I didn't pay much attention to while cleaning up the rest of the stuff on my report over the last couple years.  I should have taken care of this a long time ago, but I didn't.

At any rate, it's paid now, and my Experian score just dropped 21 points, I believe, because there's a new negative entry for this month (5/2016) because of this.  This is the only difference from last week's report, when my score was 658.  It's showing as "paid, was charged off".

This account has already been updated at Equifax as simply "paid", and I didn't get any score change there.  It still hasn't hit TU yet.

I suppose there's nothing I can do about this.  The CCT simulator shows my score recovering to 662 within 3-4 months, and over 670 within 6-7 months, and that's just using the "pay bills on time" or "pay down revolving debt" simulators.  I have one collection which will be entirely removed soon, still waiting for that.

My gut instinct right now is to just wait (which may be my only valid choice).

The thing that's confusing is the negative mark in payment history for this month, with no other payment history reported for this account at Experian.  I believe the score drop is from "time since negative" reset to 0 months.

Any thoughts or advice?

[Anonymous]

Yeah it sucks & it's not fair. I too paid a charge off earlier this year & because Discover chose to keep the chargeoff rating, it was considered a negative. AKA newly recent late payment. I hope they configure new scoring for this in newer models because we get punished for trying to do the right thing. Especially if it hasn't been sold off or gone to collections yet. 

[Anonymous]

unfortunately thats how it goes.  since they updated your account to paid in full it still updated as a recent negative account which will bring your score down.  Every month on the first of the month though when it updates your score will slowly climb back up.  If you dispute the account, it will also be updated to reflect as a recent delinquent account, so dont dispute it unless its definitely not yours.  Time is the only thing that can heal it.  That or trying to get it removed via goodwill letters

[RobertEG]

There is a flip-side to the coin, which explains why paying can effect score.

FICO is basically an evaluation of risk of timely repayment of debt.

The longer a debt remains delinquent, the more negative the effect on scoring.

While updating is not itself the reporting of a higher level of "Delinquency" with a big-D, it is in effect reporing that the debt remains delinquent up to that point, and is thus effectively reporting of "delinquency" with a small-d.

Payment of a delinquent debt both reports that the debt has remained delinquent up to that point and thereafter terminates any further updates of continued (longer) peirod of delinquency.

Not paying continues the possiblity of further updates, and thus additonal negative impact

Fair or not, it is Fair Isaac.

[JayTee1]

OK, thanks for the responses.

If the simulators at CCT are accurate, it really shouldn't take very long to recover.  (They're even simulating a 15-point jump on experian if this negative ages by one month, which I doubt, but you never know).

In addition to gardening, I'm paying down all credit card debt, and a medical collection should be entirely removed from all three bureaus in the next month.  There are only a few negatives left on my report, and almost all are getting quite old, and I have lots of good payment history over the last two years.

Time should heal this.  I just need to ensure my mortgage will go through a year from now (and the minimum I need for that is a 660 middle score).

[Anonymous]

after my chargeoff reported as paid and stopped updating as delinquent i was getting about 6-7 points every month on the first of the month for about 5 months.  it just takes a little time is all

[Anonymous]

I have also been using the CCT and myfico simulators.  I also just paid off a CO with capital one.  I only got a 2 point jump on equifax.   The simulator it came back as 30 point jump.  The simulaotrs have always be very accurate for me so I am not sure what happened here on the CO.  

I have not pulled a new 3B because I am waiting to make sure everything is updated on the CR.   CCT shows the balance is at 0 for ex but that is all score did not change.  

[JustinA]

Now I'm curious to see what happens any day now when my paid charge off at 116% utilization reports. Ugh I thought it was a good thing

[Anonymous]

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@JustinA wrote:
Now I'm curious to see what happens any day now when my paid charge off at 116% utilization reports. Ugh I thought it was a good thing

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116% utilization might actually show an increase in scores since the card was over the limit and it is counting towards your utulization.  let us know when it updates

[RonM21]

Sorry it works out this way, but I think waiting it out is a good way to go as you said. Plus at least it is not delinquent anymore, showing future lenders that it was eventually taken care of.