If you have a charge-off on your credit history, all this means is that a creditor gave up on you and turned the debt over to a collections agency. It doesn't mean you no longer owe the debt, it simply means that the creditor has written it off for tax reasons as part of their profit and loss statement; to them, it's normal; to you, it's one of the most damaging items you can have on your credit report.
So should you pay off a charge off? That depends...
1. Is it old?
If the charge-off is almost 7 years old, you might as well just let it age off; it will automatically disappear after 7 years.
2. Do you have ANY spare cash?
If you're going to try to settle the charge-off, you'll need to know how much cash you can spare. The best possible situation is for you to have the entire amount ready to pay at once; this will give you a lot more leverage with the collections agency: "I can give you guys a check for the ENTIRE amount TODAY if you will agree to...." If you just can't spare any money at all, you may still be able to settle the debt for an installment plan, although you will have to know ahead of time what your budget is like and how much extra you can put toward this debt per month.
2. Do you need to repair your credit quickly?
The charge-off will hurt your ability to raise your credit score, so if you are going to be needing to apply for a loan or credit card soon, then you will want to do something about the charge-off. If this is the case, you have a few options.
- The best possible outcome, and also the least likely, is for you to negotiate with the agency to pay a certain amount (the full amount would be the best) in exchange for them deleting the charge-off ENTIRELY from your credit history; like it never happened. Most agencies don't have the authority to do this, but it can't hurt to ask. Remember that your leverage is the threat of not paying it at all, so if you let them know that you need to repair your credit fast, you've just lost your negotiating ability; make them think that they might be able to get the full amount or a large chunk of it, but that you are possibly considering bankruptcy and that you don't need to pay off this account, even if you do. ;)
- The next best outcome is to to pay it off, either in part or in full, in return for the collector marking the account as "Paid" or "Settled." Only. Try to get them to list it as one of those two words with no mention of "charge off." And "paid" is better than "settled."
3. Or do you have time to repair your credit?
If you're not in any great rush to get your credit score up fast, then you may wish to consider striking the best deal you can get with the collections agency. If they allow you to pay in installments, then do that, and just live with the bad marks on your credit history; although it will take 7 years to completely disappear from your credit history, it's impact will lessen with time even before that. If you need to negotiate with a collections agency, or keep up a tenacious letter strategy, you may want to look in to letting a professional do the letter writing for you. While they don't do anything magical, Lexington Law may be able to help you tackle a sometimes seemingly endless problem, allowing you the time and focus to pay attention to saving money and paying your bills on time. It's nice to sit back and let someone else do the work for you. |
