pay an old charge off or not?

Question

I'm getting a mixed message regarding this issue.

Some say paying off an OLD CLOSED "charge off" account will help my score and others say it will have a reverse effect.

So which is it?

Answer 1

I agree, you must give your definition of "old" in order to have a truly accurate answer to your question. Charge-offs are simply tax related. Firstly, according to the Fair Credit Reporting Act, this charge off will remain on your Credit Report for seven (7) years plus one-hundred and eighty days (180) beginning from the date of the first deliquency NOT the date of your latest activity. With that being said, contrary to popular belief your clock should not begin anew if you contact your creditor regarding this account. Of course, check with your local government's statute of limitations as well. If you are, however, at the end of the statute of limitations, all moral high grounds aside, the charge-off will no longer negatively impact your credit rating, but you are still obligated to pay the amount owed. Also, note that depending on the amount owed, you may be litigated against and be found responsible for all court costs incurred as well. Initially after paying the creditors (where no negotiationing is involved) your credit score MAY decrease slightly, but will barely rebound because your status will only be changed from I9 or R9 "Charge-Off" to being "Settled," which is scarcely better than having a charge off on your account. And once again, that will NOT reset the clock. I would recommend contacting the bank and negotiating with the Collections Manager to either remove the charge-off or change the status to "Paid-As Agreed," "Account Closed by Consumer-Paid," or go for asking them to remove their inquiry all together. If you pursue this route keep a few things in mind: do absolutely EVERYTHING in writing and make sure that you offer payment only after receiving a signed letter from the person with the authority to make such agreements and changes. Be prepared to offer a lump sum of money (the amount may be negotiable), and if you settle on payments, then, and only then, do you run the risk of having the clock restart. And keep in mind mind that by proactively contacting the bank that you are waving a huge banner with dollar signs in front of their face saying that you have money. Finally, make NO payments until an agreement has been reached; paying either a lump sum, or making on-time and AFFORDABLE payments. Your payments are your leverage. They still want your money! Dude, I'd just make the lump-sum payment. Good luck.

Answer 2

Your question does not have enough information to give you a solid answer. "OLD" has different meanings to different people. The trade line on your credit report will be deleted after 6 years, 9 months. The regulatory requirement is 7 years, but the credit bureaus don't wait until the last minute.

If your charge off is, say 2 years old, contact the creditor and negotiate with them. All they really want is their money; tell them you will pay in full if they remove the charge-off from your credit report.

This is the new trend, as individuals today can get credit, even with a poor credit history, ( you pay a high interest rate, though) Because of this, keeping a negative trade line on your report doesn't "have the muscle" it used to.

Just paying payments or even paying it off can extend the 7 year period.

Answer 3

Generally "others" are right. Look into statute of limitations. If you pay it off, they might reopen it and it will appear on your report as new (and will stay there for 7 years). If it has already been many years since, you'll be better off just waiting for it to drop off. If you don't pay, you will likely never be able to do business with that company again.

Answer 4

It depends on how old the debt is and how you intend to pay the debt off. Your current payment history weighs more than your previous history. If the debt is 2 years or less old, then it is better to pay it off. If the debt is close to falling off your report and the statute of limitations has passed, sometimes it is better to let sleeping dogs lay. Also, are you planning to pay it off in full at one time? If not, and you are planning on making payments, you will remind the lender of the debt, lengthen your statute of limitations, and make it easier for them to sue you (not to mention make the item appear more recent on your credit report).

Answer 5

Why is your credit score even in the question ? The real question is - Do you or do you not owe the money ??

If you rightfully owe the money, not paying it renders your word worthless in the marketplace.

Do the right thing.