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Question By
Aceclub

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Charged off Debt. Should I settle?
I have an account that shows charged off as bad debt profit and loss write off. The account is still with the original creditor. I contacted them and they offered me a settlement but they said nothing will be updated on my report until it's paid off and once it's paid off it will read charged off- settlement paid in full. Is it worth making the settlement? Will that status impact my score for the better? I was making payments on it in the past.

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The pay for delete is always a nice option to explore. But if thats not an option the settlement is next best option. It looks better than never paid at all. Even with the settlement you could still ask for deletion. I did manage to get a settlement payment deleted. You have to talk with them.

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You want to aim for a pay for delete.  Research carefully on credit related sites.

Reply by
Aceclub

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And if they refuse to give me that option, is there any benefit with it being a charge off settlement paid?

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As said, try to get a "pay for delete agreement" but if they are unwilling to do that then pay it anyway because if you do not, the debt will most likely be sold to a collection company and then you will have two negatives on your reports for this account and one will be a collection which is a bad thing to have on your reports. Paying without a pay for delete agreements is not going to yield any improvements in your scores (unless the amount owed is being factored into your credit utilization, if that's the case it would help) but it is a preventative measure to prevent a collection from popping up.

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Many times I will agree with the general advice providers as they have sound judgement, however, how can I say this, DO NOT PAY charged off accounts, it is no worse or better whether you pay it now or not. The debt has already been written off the books of the original creditor so they likely will not work with you. There are many ways of still getting this negative deleted from your file, and positively many methods with dealing with the junk debt collection agencies. Your biggest mistake was allowing the debt to go so long than it was charged off...dont compound it by trying to pay a dead debt. The damage is already done. It will NOT look better on your credit report that you paid a charged off debt, thats a myth...to potential credit grantors it will read the same....."Debt charged off". Allow a little time to go by and watch your credit report to see if the original creditor continues to report this negative monthy. Most, after it has been charged off only report it once and there it stays until it must be removed because of legth of time...which is roughly 7 years. Make certain every aspect of this charged off account is accurate....Originally amount, past due amount, dates, every little detail. 99% of all credit reports contain inaccurate information, use this to your advantage and dispute it. There is a great chance, since they no longer are updating/reprorting regularly, that they will not respond to a request from the credit bureau to verify the info as you are disputing within the 30 day period, and thus it will be removed. Best time to dispute is in times of very busy periods, holidays like Christmas work the best. Should a junk debt collector pick this up through data mining, simply dispute whether they have the right to collect this debt, and ask for a debt validation. Most, yes most will not have what is required, a signed contract between you and the original creditor proving you owe this debt, and almost none will have a contract between the original creditor and themselves allowing them to collect this debt/showing that they now own this debt. (wish I had more time....these are easy to get removed) Do not allow this to happen again. NEVER forget, credit is a priviledge, NOT a right. Protect it so you wont have to fight like this again. ALWAYS stay in contact with your creditors before this happens. Any specific questions, let me know...also, is this medical or unsecured debt?

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Paid vs Unpaid charge offs is of course subjective to the lender reviewing the reports, but I would not call it a myth about paid charge offs looking better. To back this up a little, many or I may even say most mortgage lenders will not issue mortgage loans to anyone with unpaid negative debt showing on their reports, the negative debt must be paid before a mortgage loan can be issued, so there is my reasoning for that. (as I said in previous post, paid vs unpaid will be scored the same, but utilization may be affected with an amount showing)

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There is not a good chance that a creditor will not respond to a dispute, chances are the creditor will respond and the account would update (causing a score decrease). If the general practice was that creditors and debt collectors do not respond to disputes, then no one would be having credit trouble as they could just "dispute any negatives and have them removed" it does NOT work that way. Occassionally, it does work, but not often.

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The original creditor will most likely not just forget about this debt, most likely they will sell the debt to a debt collector. Once a collection hits the reports, it will cause the op further problems and further damage to scores and credit profile. It is much more difficult to remove a collection account than prevent one from popping up.

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Also keep in mind that every failed dispute attempt will result in an update and it the account has not updated for a while, then scores will be damaged every time a dispute fails. It is not advisable to keep dinging a score from continuing to dispute.

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Another thing to question, is if this debt is still within the Statute of Limitations to be sued for it. If it is within the SOL to be sued, the OP is at risk of being sued, paying the debt would prevent that. Being that they are willing to settle, it may be outside the SOL, but they have told the OP that they are willing to accept payment.

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And, what if the creditor decides to continue to update the account monthly? That is another bad scenario that the OP would face.

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Negative information is NOT easy to remove and prevention is the key. This all sounds like some type of sales pitch for credit repair.

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