Reasonable Assumption?

[cdtotten]

It's truly just a guess, since there is no way to know the ultimate affect, but I do know that not having revolving credit in your mix is painful.. I would expect the end result, paid off, would be about 75-85 points total.

[doctort]

I can live with 75 points at this point.  This is a Cap 1 credit card and I know that barring a GW miracle, I'll have to

live with the Chargeoff Status  for the next 7 years.  I will feel better about it though knowing I have 75 points for

paying it and eliminating the crazy util it was costing me.  Thanks again to those who responded.

This is my spreadsheet to motivate me to handle this quickly.

CL                   BAL             UTIL        Increase

$1000             $1000        100%

$1000             $900             90%     10 pt

$1000              $800            80%     20 pt

$1000             $700             70%     30 pt

$1000             $600             60%     40 pt

$1000             $500              50%     50 pt

$1000             $0                     0%     50 pt

[llecs]

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@doctort wrote:

Thanks.  I learn at least one new thing here daily.

So let me make sure I'm clear.

Paying from 220% down to 100% util.  Expect no score increase because I was dinged for being OTL.

Paying from 100% util down to 50/49%.  I can expect a 50 point increase.

Paying from 50% down to 0%.  I can expect another 50 point increase; but also expect to be penalized for not having any revolving credit.  Am I correct to this point?

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I've often said that for every 10% you pay down on util you gain 10 points, but there's caveats with that.

First, it's a rule of thumb by my observations and others I bet and certainly not a FICO fact.

Second, that's assuming you have a good mix of credit and that none of your CCs are closed. If you have at least 2 revolving and a charge card, then this generally holds true. For example, if you have only one CC and that's at 100% and you pay to one percent, you won't get a 90-100 points gain. Maybe you'll get 40-50 at most.

Lastly, and this applies, the 10 point gain is an average only and it assumes you pay off ALL of your CCs to zero with the exception of one CC. That one CC should report a balance of under 9%. Paying them to 50% will not result in a 50 point gain. Most of the points gained will appear below 50 points with a majority gained after paying below 20-30%.

As mentioned, you are getting dinged with any card being OTL. I bet you'll see 20 points gained on TU and a little less on EQ if you brought all cards to 99% or less. If you brought it to 50% on ALL cards, with no individual card over 50%, then you'll see maybe 20-30 points gained. So, if I had to guess, I'd say 40 on TU and 40 on EQ. If you brought it all to $0 with the exception of one card, and if you brought that to a balance of under 9%, then I bet you'll see 100-110 on TU and about the same on EQ. In my experience, EQ likes lower util more than TU and TU likes cards under 100% more than EQ.

Certainly not scientific, but if I was a betting man that's what I would guess.

[doctort]

 So llecs, after paying off this card and having no other revolving accounts, would a new line of revolving credit be in

my best interest for scoring purposes?  I do subscribe to the slogan I've seen on this site to fix existing credit before

taking on new credit.  However, if a $300 secured card would help my score after this Cap 1 ordeal, I would probably entertain it.

[llecs]

Maybe I missed this: how many CCs do you have open outside of CapOne?

[doctort]

None.  Cap 1 chargeoff is the only revolving debt I have.

[haulingthescoreup]

I don't think that you'll see that straight 10 points per 10% thing. After a while, you'll start to see diminishing returns.

But you are being penalized for being OTL, so obviously that needs taking care of.

Once you have this charged-off card paid off, you will lose the credit limit, which will revert to $0. As said, you will then have no open revolving credit, which will hurt. And you will still be dinged for the existence charge-off, even if it is now paid off. The fact that you once had a charged-off card will continue to report, hurting your scores, although less so as time goes by.

What you might want to do, assuming that this CO'd card continues to report its CL, is pay it down to about $50, which would be 5% util, and pull a FICO score again, seeing if it has significantly improved. Then you could decide whether to apply for a secured card to start building new clean credit. Once you get a card, and it reports on all three reports, you can finish paying off the CO'd card. That way, you'll have some open revolving credit.

If your Equifax FICO score (the one that you can buy here, or from the EQ site) has gotten up to respectable levels, I'd advise visiting local credit unions (CU's) to inquire about their CC offerings. CU's are generally better at working with rebuilders and less rapacious in their terms. Many (certainly not all) pull Equifax. You could print out your FICO EQ score report once you've paid down the CO card to $50 or so and show it to CU loan officers when you visit, asking if they thought that you would probably qualify for one of their cards. Tell them it's a Beacon 5.0 score (that's the industry term for the FICO Equifax score.) They would have to pull your credit for real if you apply, resulting in a hard on your report, but that's part of the deal, and at least they might be able to give you a good thumbs-up, thumbs-down estimate of whether you would qualify.

[doctort]

Thanks.  I'm putting all the info I've gotten together and weighing it all.  So that when Monday comes I'll be ready to take action.  I mentioned this in my other thread "Capital One Drama" but I'll mention it again here.  I received a letter from Cap 1 offering to reduce APR to 0% if I agree to settlement plan making monthly payments until the account is paid off.  My plan is to

1)  accept that settlement.  Agree to pay $183.33 for 12 months thereby ending the compounding charges.  In the FICO simulator I gain 10 pts the first month of making that payment of $183.33.  Continuing to pay the $183.33 for 12 months would net me another 70 points from simulator.

2)  Take the money I was going to use to PIF cap 1 and  pay off the 8 collections.

3)  Hope that removing 8 collections put me in a little better standing to get a secured card. 

4)  After receiving secured card, double up monthly payments and pay off cap 1.

I know the Cap 1 will continue to show on my CR, but any guesses how having the 8 collections removed might affect my scores.  These are the only collections, they're all medical, and OC has agreed to PFD.  They're all greater than 2 yrs but they're still there.  If that was the only action I took how might that affect my scores points wise?

Btw I am currently in negative score bucket #2 because of medical judgment.  Today I'm at 573, not great, but I was at 418 when I came to this site.  I have a signed court order to dismiss the judgment.  Papers mailed to CRAs, I had one

other chargeoff that I had PFD success last week with.  Waiting on those 2 actions to hit report.  I was hoping to hit

620 by paying off cap 1 for the sake of my morale.  But oh well.  Thanks again for your advice.  Little disappointed, but I did learn something in the process.

[RobertEG]

To get to the point that a CC is both over the limit and also charged off suggests multple prior delinquencies/derog reported on the account.  You cant just view % util as a single category factor in your score, and thus linearly project gains in scoring by paying it down.

What 30/60/90+ lates were posted on the OC while it was open? And the CO remains.  No payments you make against debt will remove prior derogs reported on the debt, so you will remain in a "dirty credit file" scoring category.

Further, when an account is charged off by the OC, it is written off of their accounting ledgers as no longer being an account receivable, and is thus is effectvely closed.  When you get the account under 100% of its current $1K CL, I doubt they will still permit you to charge on the account against that prior CL.

 When finally paid off, they will update its CL to zero.  Thus, you wont have 0% util, you have a closed account that does not score in util.  So you will have a credit file that shows no active revolving debt, and no calculation of % util or revolving debt.

[doctort]

To get to the point that a CC is both over the limit and also charged off suggests multple prior delinquencies/derog reported on the account.  You cant just view % util as a single category factor in your score, and thus linearly project gains in scoring by paying it down.

What 30/60/90+ lates were posted on the OC while it was open? And the CO remains.  No payments you make against debt will remove prior derogs reported on the debt, so you will remain in a "dirty credit file" scoring category.

I understand that when this account is paid off, the 90-days lates will remain and the chargeoff will only be updated

to reflect the new paid/settled status.  I also know the odds of Cap 1 deleting are slim to none.  My only motivations as

far as this account goes is the obvious (1) further legal action (2) the benefit of any points gained from this account that currently hits my CR with 200+ util.

Further, when an account is charged off by the OC, it is written off of their accounting ledgers as no longer being an account receivable, and is thus is effectvely closed.  When you get the account under 100% of its current $1K CL, I doubt they will still permit you to charge on the account against that prior CL.

The account has been closed for almost 18 mo. so I'm not interested in being able to make new charges.

 When finally paid off, they will update its CL to zero.  Thus, you wont have 0% util, you have a closed account that does not score in util.  So you will have a credit file that shows no active revolving debt, and no calculation of % util or revolving debt.

Consensus among those who have responded to this thread is that the above is correct.  I'm ok with that.  At this point, the issue remains:

1) Since I will be tied to the negative derogs with Cap 1 for the next 7 years.  The 90-day lates and the chargeoff.  Is it better to take the option that benefits me (settlement vs pif)?  I understand the morally correct thing to do is PIF.  However, I am comfortable in my conscious paying the settlement as it is the amount I owed when circumstances caused me to default.  I tried to make arrangements and Cap 1 refused.  Now almost 18 mo.s later I have interest, late, and otl fees double the original balance.  So I could accept settlment in good conscious.  If I PIF i'm doomed for 7 yrs, if I settle i'm doomed for 7 yrs, so why not pay less for my doomededness.

2)  By paying less, I will have the funds remaining to eliminate 8 negative items from my CR.

Finally, I enjoy all of the input because I'm learning, however, I have 2 open threads that basically deal with the same issue, so from this point on, I will respond in my other thread, Capital One Drama.  Feel free to share your advice there and I will respond.  I hope this experience helps someone else in the process.  See you at the other thread.