Financial Information
Is it bad to pay off a charged off debt? Will your credit score go down?
Question : Is it bad to pay off a charged off debt? Will your credit score go down?
I heard it actually makes your credit score go down if you payoff an old charged off debt. So should I not try and pay it? Or can I negotiate with the collector/creditor to pay the debt, and have it removed from my report.
pay off debt
Best answer:
Answer by A3
I wouldn’t try negotiating. You should also check the staute of limitations in your state. If it’s been long enough you may not technically owe anything. If they call tell them you can’t afford to pay. Never negotiate or tell them you’re sending money- that puts the ball in their court.
I would get a new credit card, the ones that charge you because you have bad credit. And start using that one wisely and build up your credit.
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#2 written by Ed Nailor 1 year ago
The way you approach this depends on your goals. The simple answer is that yes, this will bring your scores down in the short term. Most of your credit score is weighted by what has happened in the last 24 months. If the accounts are old there is a good chance that they are not making a great impact on your score.
However, by paying them off (Or even communicating to the creditor) this will update the most recent date of activity to a current date and now this acount gets factored back into your score. And although a “paid” collection/chargeoff is better than an “unpaid” collection/chargeoff, the fact of the matter is that it is still an negative item and will reflect in your score accordingly.
My advice: If you are seeking to buy something such as a home or car in the near future (6-12 months) leave the old accounts alone. Rather focus on building good positive credit (using a secured credit card works well) and then attack these old accounts once you have made your large purchase.
If you are a year or two out from buying anything, then yes.. work out a settlement with the accounts and get them paid. After 12 months the negative will fade, as long as you are adding some good positive credit to yout credit profile.
Good luck!
Ed -
#3 written by Mcadeiz 1 year ago
Depends on the company. Sometimes you can come to agreement that if you pay off the debt, it will simply showed as a paid account on your credit, which can help your score. And even if you do pay it off and it shows as paid after charge off, it can help…shows that you fell on hard times, but you kept your promise to paid your debt.
Whatever you do, DO NOT ever take the offer to pay only a portion of the full balance, pay it all. That will have a negative effect on your credit.
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If you plan to pay off an old debt in hopes of improving your credit score, remember this. The creditor has to do something with the negative report on your history. Just placing “paid” on the account does NOT remove negative information on your report. And the comments that a “paid collections account” looks better then an unpaid one is nonsense! It’s still a bad mark, and it will still hurt your score.
That said, what you need to do is contact the creditor and negotiate a plan where if you pay the bill, they will agree IN WRITING to remove any negative information from your credit report. If they refuse to do it, what’s the point of paying the bill?
When you call to negotiate, DO NOT offer to pay them anything! That will re-start the statute of limitations clock and make you obligated to pay the debt for another 7 years. Simply tell them you are negotiating a payment plan and not offering to pay anything unless they come to an agreement.
See the link below for more help.