Question:

My credit card has been written off, what kind of difference would it make to pay it off?

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I have a credit card that I haven't paid on in years. Maybe 3-4 years. My debt is for about $3000. I want to pay them off and bring my fico score up. However I wonder if it would even make a difference since it has been written off...I know paid debt is better than unpaid debt...but it would be a huge chunk of money for me... and if it only makes it "look better", than i'd rather not do it... Any advise on how to repair my credit score at this point?

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6 ANSWERS


  1. Paying off old debt won't improve your score.  Even if you get a delete for pay agreement, the collection agency can only remove what they reported.  The original creditor's charge off will remain on your report.  

    If fact, paying it will initially decrease your score.  The older the item, the less impact on your score.  When you pay old debt, it's a current transaction and counts more in your score calculation, including the negative stuff.

    However, creditors look at more than just your score.  They look at your whole credit report.  That unpaid derogatory item will keep you from being approved for a mortgage and some other credit lines.  Paid old debt, even if marked "settled", looks much better.

    Since this debt is over 3 years old, offer 25% to settle.  Chances are the debt is close to the Statute of Limitations (SOL), the timeframe to bring lawsuit.  Check for your state:  http://www.bcsalliance.com/statute_of_li...  If the SOL hasn't passed, they could still sue.  Another reason to settle old debt.

    By the way, derogatory items age off your credit file 7-1/2 years from the date of first deficiency.  This is per the FCRA.  NOTHING restarts this clock.  


  2. The charge-off will remain for up to seven years, regardless of whether you pay it or not. The only reason to pay this is if you are applying for a new mortgage....Otherwise, the marginal increase in your credit score isn't worth it.....Also, by contacting the debt collector, you might trigger aggressive collection activity and they may even try to take you to court to get a judgement.

    Honestly, you might want to just wait till this falls off your credit report naturally in three more years.

  3. You should obtain your credit reports from Trans Union, Experian, and Equifax. Check for any accounts that do not belong to you and incorrect info. Anything older than 7 years will drop off your report. Check whether this account is on your file and the date of default. You can make pay-for-delete offer to the collection agency that they provide you in writing that they will delete this derogatory account from your credit files after you pay them. Make sure you get this letter before you send them any money. Unless these deogatory accounts are removed from your file the FICO score will not have much improvement.

  4. Don't bother. Really. I did that. I had a bill that was for only $1000. I had paid it, but it was somehow never recorded. Big fights between me and the company. So, they ended up doing a charge off. When I went for a car loan, they told me that it looked bad. So, just for the sake of the stupid loan, I paid it off, thinking that it would make my credit look better. It didn't. The credit guy (at the loan place) expained to me that a charge off (regardless if the money is still due or not) never changes, it always looks bad. In seven years they have to wipe it off your report anyway. By you paying it, it now starts the 7 year cycle all over again, as there was "activity" on your report for that one account. I had that account in charge off status for 5 years before I paid it. Then, once I paid it off, I thought it would be gone in another 2, but no, it showed up 6 years later (when I went to buy a house), so that totalled 11 years AFTER the account was closed.

    I know people will tell you to pay it, but, in my experience, it just wasn't worth it. I should have taken that money and paid off an account that was still active.

  5. It will make a huge difference on your credit file and it will improve your credit score substantially.

  6. If you pay it off. You won't get sued. Just because the credit card company has given up on collecting it doesn't mean that you don't owe it anymore. they will sell it to a collection agency that will eventually take you to court to get the money.

    Knuckle down, pay it off and be done with it. Get rid of the cards. All they are good for is getting you into debt and keeping you there.

    Got rid of my cards over a yr and a half ago. Don't miss them a bit. They are just a false sense of security. A crutch.  

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