My understanding is that paid debts impact FICO 9 scores less than unpaid debts. So, if FICO 9 ever gets off the ground, you'd be in better shape.
Further, I'd expect that an unpaid $393 could come back to haunt you some time in the next 6 years; not so a paid $393 (tho' you still have to live with the charge-off until it drops, absent a successful GW letter).
The DoFD determines the start point it can remain on file and its 7.5 yrs max from this point and illegal to change. I would pay it as they are liable to update it every month and Fico cannot recover with it updating as it looks like it just happened, paying it stops the monthly update.
@Anonymouswrote:I have a charge-off of $393 in 2017 from an old Citibank credit card. I never had an unpaid debt before and usually has less than 10% of credit utilization. But this single record pulled my credit score from well over 700 to around 670. The debt is still NOT sold to any collection company. I have contacted multiple Citibank senior managers with "goodwill letter" and "pay full for delete" proposal. But they are not willing to remove the charge-off because they think it's not their fault and they don't really care if pay it off or not.
So now my choices are either paying off the debt in full to Citibank immediately or just ignore it for 7 years. I understand paying off will only change the balance to 0, instead of removing the record, but my question is will paying off give me any future benefit or can it have any Negative impact on my credit score in a short time? will it re-activate the case status and start another 7 years loop for removing the record?
Thanks!
My advice is to pay it.
1. It will not "reset the clock". The estimated removal date is based on the Date of First Delinquency, which does not change upon payment of the balance owed.
2. The original creditor will officially close the account, preventing any future updates to the bureaus. An unpaid charge-off may be continuously updated as late by the original creditor, making the charge-off look "fresh". Paying it will reflect a closed, paid charge-off status which will allow the derogatory account to age and lessen the damage to your score over time.
3. Paying will prevent any further collection activity. The original creditor may sell or transfer the unpaid debt to a collection agency at anytime within the Statute of Limitations which could result in a collection item popping up on your reports - in addition to the charge-off. You could also be sued (though rare for a small amount) and end up with a judgement on your reports.
4. The balance owed is currently being factored into your overall utilization. I don't know what the credit limit was for this card, but if the balance is near or over the credit limit, then you are being further penalized for high individual utilization. Paying it to zero will eliminate any utilization score dings.
5. A paid charge-off looks way better than an unpaid charge-off upon a lender's manual review.
6. You may continue to send goodwill letters after paying the debt in hopes that they land in the hands of some sympathetic soul willing to remove it for you.
@Anonymouswrote:I thought of this before. Because it seems Citi doesn't care if I pay or not at the moment which makes me lack of chips to negotiate. Collectors may be more interested in the "pay for delete" solution. But I don't know if it's going to happen. I heard big creditor like Citi they could just eat the debt. Furthermore, I'm worried if it's going to a collection company, my score could be pulled again to an even worse situation.
As for the debate. The bottom line from Citi staff is that their system did send out the balance statement to my old address. So they don't care if it's lost or stolen or not forwarded correctly, even I emphasized I never received the notification and unaware of the debt.
You want to settle it with the OC before they engage a collector as that would be a second entry and their is no guarantee of a PFD with them, a collector cannot agree to a PFD with anyone other than themselves so you would still be left with the OCs entry even if the CA agreed to a PFD.
@Anonymouswrote:Going to a collection agency might actually help your chances, as perhaps they'd be willing to PFD. Not sure if a collection is any worse than a chargeoff.
What happened? Are you saying that this wasn't your fault? Have you tried disputing?
OP would likely end up with both a collection item and a charge-off on their reports should this debt go to a collection agency and that would damage OP's FICO score more (possibly an additional 20-30 point hit). Even if the collection agency were willing to PFD (and not all collection agencies go for that so you're taking a pretty big chance), it would still only remove the collection item tradeline - not the charge-off tradeline. So there is no point going that route.