Paying Charge-Offs and How Score is Effected

[pochikumata]

I have several item on my credit report that have been charged off. I have made arrangements to do a settlement with the collection agencies on these. They said that it will be annotated as paid with a zero balance but the charge-off notation remains. My question is, how much of an increase do these type of actions typically have on your credit score?

[GFer]

Nothing by paying them off. No points. But does look good under manual credit review when you are trying to get new credit. And then that depends on the lender.

And if I'm not mistaken--they remain for 7 years from date filed or 7 yrs from date paid. Someone chime in if I'm wrong.

Message Edited by GFer on 07-16-2008 09:07 PM

[Anonymous]

Depends on how you pay.

In any event, merely paying a charge-off does nothing to improve your score. It does look better on manual reviews, and I've seen a fair amount of anecdotal evidence to suggest it works in your favor on some automated reviews as well. But FICO scoring doesn't care.

If you pay all at once, this doesn't change the date the delinquency falls off your credit report. But if you enter into an agreement to make installment payments, some CAs will interpret that as re-setting the DOFD and therefore restarting the seven-year clock.

[fused]

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pochikumata wrote:

I have several item on my credit report that have been charged off. I have made arrangements to do a settlement with the collection agencies on these. They said that it will be annotated as paid with a zero balance but the charge-off notation remains. My question is, how much of an increase do these type of actions typically have on your credit score?

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Are you certain the CA is reporting these as charge-offs and not collections? And are you sure the original creditors are not reporting these charge-offs WITH balances? Please clarify, FICO scoring makes a big distiction between a third-party reporting an unpaid charge-off and an original creditor reporting an unpaid charge-off.

[pochikumata]

I guess I didn't save my last reply, so try this again. Thanks for all the feedback guys. You were right they are collections, so would that increase my credit score at all by paying them?

My other question is that I have other items on there such as utilities and bank accounts, which would be permanently removed once I pay them. My question is what would you recommend that I focus on first as far the course that would increase my credit score the most?

[Anonymous]

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pochikumata wrote:

I guess I didn't save my last reply, so try this again. Thanks for all the feedback guys. You were right they are collections, so would that increase my credit score at all by paying them?

My other question is that I have other items on there such as utilities and bank accounts, which would be permanently removed once I pay them. My question is what would you recommend that I focus on first as far the course that would increase my credit score the most?

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Please see your PMs.  You should see a yellow envelope in the upper right-hand corner.

What is your reasoning for thinking that the 'other items' would be removed once you pay them?  A paid charge-off is still a charge-off.  The same with a paid collection.  You will not receive any points for paying the CO's/collections; however, they look better under a manual review (as was mentioned earlier).  Also by paying them you avoid being sued.  You need to be aware of the SOL on these accounts.

[Anonymous]

Sorry, but all of the above replys are true. I found that out the hard way. You should try and negotiate with the company to remove the lates and eventual charge-off if you pay the balance in full. When you still owe them, you have some leverage, once you've paid the charge-off you lose all leverage and all you have is a $0 bal, with all that bad payment history.

[haulingthescoreup]

If you haven't already, please look in Frequently Requested Threads and read about PFD's (pay for deletes.) You still have some leverage with the CA's, as you haven't paid yet. It's very important to do this correctly, though, so do read first.

Also, please read Credit Scoring 101, at least the beginning of it!

Both these threads are stickied at the top of this forum. Homework first! It's a minefield out there.