Is it wise to pay off a debt to a collection agency once the debt from the credit card company is charged off?

Question

Given the fact that a charged off credit card account stays on a credit report for 7 years, should a debtor make attempts to pay off the debt sometime soon thereafter the official charge-off in good faith when he/she has their finances in order and is ready to pay, or just simply ignore the charge-off forever since it's on record for those miserable 7 years?

Answer 1

Roderick,

Let me break this down for you.

Once you are in a situation where you can even pay a portion of the debt, you need to send the collection agency a pay-for-deletion letter.

Just remind them that you have other creditors to pay, and "in the spirit of compromise" you would like to settle the account for $XXX dollars as payment in full IF and ONLY IF the collection agency will remove the negative item from you credit report at ALL THREE credit bureaus.

The collection agencies will try to give you the okie-doke by saying that they can not do this (because it's extra work for them). However, they have the ability and authority to do it.

If the collection agency declines your offier, just inform them in writing that your payment went to another collector who agreed to the aforementioned terms.

Please be aware that you are NOT TO TALK to the collection agencies over the phone or through e-mail. All correspondence must be sent via CERTIFIED MAIL. In addition, you must maintain copies of the receipts as proof of mailing.

See hyperlink below.

Good luck.

Answer 2

First of all the rule is DON'T pay a charged-off debt UNLESS you have an agreement to from either the original creditor or the collection company in writing first that the debt will be consider paid satisfactorily or they will not verify the existence of the debt and when you dispute the debt with the credit bureaus it will drop according to federal law from your credit report. If you pay a charged-off debt after the state statute of limitations (varies by state but normally 5 years) then you now have reset the clock for collection.

Paying a charged-off debt without getting a written agreement other than makin you feel better is dumb finacially because it will hurt your credit scores (although FICO is i understand taking this into consideration with new models).

Good Luck

Answer 3

Theoretically, yes- it should have fallen off your report. Most places suggest getting a current credit report every 3-6 months. Get a current credit report and look at it. If you have a hard time understanding it, don't feel bad- you're not the only one. Take the report to your bank and talk to a banker. They should be able to help you decipher it. If the credit card company is particularly tenacious (if they've kept it current by continuing to report the outstanding debt), you may have to settle-- Come to an agreement with the collections agency that you will pay a lesser amount and they will consider the debt paid. It doesn't look as good on your report as a regular pay-off, but it looks better than an outstanding account. If you settle- you may have to come up with a fat wad of money really fast to meet the requirements of the settlement.... But then you'll know for sure that it's taken care of, and that it won't be a horrific blemish on your report. If you don't settle, then you don't know anything for sure. If this is the only "bad" thing on your credit, then rebuilding your credit shouldn't be too much of a task.

Answer 4

This Site Might Help You.

RE:
Is it wise to pay off a debt to a collection agency once the debt from the credit card company is charged off?
Given the fact that a charged off credit card account stays on a credit report for 7 years, should a debtor make attempts to pay off the debt sometime soon thereafter the official charge-off in good faith when he/she has their finances in order and is ready to pay, or just simply ignore the...

Answer 5

if you can work a settlement with the collection agency including a letter stating that the debt has been paid and a letter from them saying that they will report it to the credit agencies as paid you should pay what ever you can negotiate however understand that when a collection agency purchased your debt they only paid about 40 cents per dollar to the credit card company so when you are negotiating take that into account.
Good Luck

Answer 6

Ignore it if the debt is past the statute of limitations. Paying on an old debt can extend how long until it falls off your credit report. A charge off doesn't mean you don't still have a debt that is owed (assuming it isn't beyond the statute of limitations).

Edit: BTW, ignore the answer mac gave you, he is clueless if he thinks negative information about a credit card can remain on your credit report longer than 7 years.

Answer 7

Personally, I don't see how it would help you to pay it off, other than to alleviate guilt of some sort. I'm sure you have other bills that need paid that you DON'T want to show up on that report, that would take precidence right now.

If you plan on trying to get credit for say...a large purchase like a car or house within the next 7 years, it will help to pay that off because it will still show on your credit as a bad payment history, but a paid OFF bad history. The new loan officer will look at a late pay off with more favor than a disregarded bill.

Answer 8

NO,
A Paid charge off is just as bad as an unpaid charge off. It only looks different on the bureau. Most companies will sell your charged off loan to a company right before its 7 yr due date . They will offer deals ,discounts ,threats and all kinds of things to get you to pay this loan. If you make any kind of payment or agreement then you start a new 7 yr history on your credit. Dont answer their calls or letters let it go.

Answer 9

Given the debt is a credit card, it will still haunt you after the seven years. You do not want to negotiate a "settlement" because that will still show the charge off on your account but will show settled. The only way to correct your credit would be to pay off the entire amount owed- even the interest- and pay it directly to the credit card company- make sure you speak with a supervisor and get their name- make sure you are told how soon they will report the pay off to the credit bureaus and ask if they submit it to ALL of the credit bureaus- insist on it!!

Answer 10

If you like being in debt, then by all means don't pay it off. Both the credit companies and collection agencies love it when all you do is pay off the interest.

If you like credit card companies constantly sending you offers, then by all means keep paying off the bill (it keeps your credit rating up, which means, "Yes, please keep sending me offers to become more indebted!")

If you think they should all leave you alone. Then pay it off.