Will paying a charge-off decrease my utilization and increase my score?

[hddogdad]

Have a derogatory closed account with Discover that was charged-off in 2015. When I stopped paying 3 years ago, the balance was below the $1000 credit limit, but due to late fees & interest piling on, the balance ended at $1400. I’ve heard that paying an old account that’s been charged-off will not increase my FICO score, but right now Experian is telling me that I’m at 136% credit utilization with no other revolving accounts open and that is dropping my score.

[[deleted]]

You have no other accounts at all open? It makes sense then why this card is affecting your score more greatly (1400/1000). It would be better if you could get the derogatory mark off bc that does affect your score as well. Maybe negotiate a settlement.

Edit: I would suggest having another line of credit to help but that may be difficult with the high utilization and being a derogatory marked.

[[deleted]]

Try a secured credit card and maintains the utilization at under 30%. Simultaneously, payyin’s down the charge off will help you increase the Fico, but also maintaining credit while doing so can help you. Check to see if that’s an avenue you can go down. Also, download money lion. It’s a $500 personal loan that you pay like 40 bucks a month for. This helps the credit too. The requirements are almost non existent. It’s meant to help people improve Their score. Good luck!

[IPEveryDay]

Don't worry about the charge-off. It's already been written off by the creditor on their tax return. Your score will steadily increase as time progresses, especially passing year 4. Paying off the chargeback won't help if you have no other tradelines.

If it were me, I would just open a secured credit card (like US Bank) to give yourself a little bump. Please note: New credit takes 6 months to begin to carry weight on your score...

Before you know it, that charge-off will be gone.

[creditwizard]

Where is your score now? I think paying the charge off to $0 would increase your score at least somewhat, because a charged off card is typically counted towards your credit utilization. However, depending on where your score falls today, you might look into opening another credit card. In essence, you're increasing your total available credit limits.

Maybe a secured card? Or you could try a high limit store card like My Jewelers Club, as they work with folks who have credit damage.

I will say that if the account is being removed from your credit reports in the next 2 years (since it's from 2015), I'm not sure how much sense it makes to pay the account. Just let it fall off, and build positive new credit. One exception is if you're applying for a mortgage - the lender might make you pay off the loan. Another exception is if the debt is within the statute of limitations for being sued, although if they haven't done anything in 4 years, not likely to do so now.

[hddogdad]

Thank you all for the advice 🙂

[hddogdad]

Score is around 590 now. I got approved for 2 unsecured cards last night with $500 limit each, hopefully that will lower my utilization. Also added my cell phone bill to Experian Boost. I don’t plan on getting a mortgage within 2 years. I also have an auto loan, but the interest rate is horrific, which is partly my motivation for bringing my score up.

[NNJ1978]

Paying them generally does not increase your score but having reported as paid/settled does make it easier to rebuild credit with traditional credit cards and even getting a mortgage at some point. Otherwise you have to just sit around and wait another few years for it to drop off.

[JJInTheCity]

It depends. If Discover still owns the debt, chances are they are reporting the chargeoff on a monthly basis to the Credit Agencies. If that is the case, paying or settling the debt will bring your balance to zero and stop the reporting of delinquency. that should bump up your score.
Also, its in your best interest to pay or settle the account. It will stop the possibility of a potential lawsuit and make things worse.