Should charge-offs be disputed, settled or left alone on credit reports

QUESTION: I am trying to fix my credit report and feel kind of confused as to which choice to make. I was told by one person to dispute the 2 charge offs I have. Then I was told by another person to send a “settle to delete” letter for the charge offs.

I am trying to purchase a home. I am a first time buyer and I truly want to better my life for my daughter and I. On my credit report, I have one charge off from a few years ago(account opened 2013 & updated 2016). I was involved in a car accident (car was totaled) and the insurance company I had only paid for what the car was worth. Leaving the remaining balance up to me. They also received the warranty payment I had on the car as well. The finance company received the car. I was left with no car and no money. I feel like I was ripped off. When I purchased the car, I asked about GAP insurance but the dealer told me that I didn’t need that since I was going to have full coverage for my car insurance. I had to start over and now a $4,500 balance is left on my credit report as a charge off which I am still left to pay.

I also have an old credit card balance on my account that was opened in 2008. Its saying on my report that it was last updated in 2013 but the card was closed out from the company way before this.
I just want to know the best way to handle these 2 charge offs so that I can fix my credit score and report. Any suggestions will be greatly appreciated!

ANSWER: It definitely sounds like you got the short end of the stick with the car situation. It may be a waste of time trying to undo that situation. As far as the 2008 account is concerned I would not touch that in terms of disputing or settling. It seems old enough that it should be coming off your credit reports soon. If it has been 7.5 years since the account was charged-off request the credit bureaus to remove the charge-off. Negative items cannot be reported past this period, but oversights can occur.

In reference to the car debt, you may want to pay the charged-off amount, in full, and here is why. Mortgage lenders look more kindly upon a charge-off paid in full as opposed to one that has been settled for less or not paid at all. But, before you offer to pay the charge-off in full speak to someone in management to see if they will agree to delete the charge-off from your credit reports. Explain to them that you are trying to obtain a mortgage, you are willing to pay but a full deletion would help you get a better interest rate. Make sure you get in writing any agreement you are able to negotiate.

If you choose to dispute the charge-off and it comes back verified by the creditor, the date of last activity will update to a current date and this can harm your credit score. Even if a dispute results in a deletion, that deletion may be temporary if the creditor regularly reports to the credit bureaus. In other words, it can be reinserted.

Make sure your current credit lines are paid on time and you are carrying little debt. Mortgage lenders like to see a positive payment history of 2 years on your current credit accounts along with low balances.


Leave a Reply

Your email address will not be published. Required fields are marked *