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Profile picture for peter ullrich

What is better for my credit report? Paid in full or charge off with 0 balance?

I am negotiating a settlement on a 2nd mortgage on my property. The creditor has agreed to report the account as charged off with 0 balance. Should I try to get them to report the account as paid in full? Which scenario will be better for my credit score?
  • February 20 2011 - Dallas
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Answers (6)

Profile picture for wetdawgs

I'm puzzled why "paid in full" is even an option?  My understanding is that they can't report it as "paid in full" unless it is indeed paid in full, and you've told us that isn't your intent.    Are you paying anything?   Then it is charged off.   Are you paying a smaller amount than the original loan?  Then it is paid in full for less than the original amount.

  • February 20 2011
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"Should I try to get them to report the account as paid in full?"

And how exactly do you plan to do this unless you actually pay it in full? You are asking a question that in all probability is not even an option. If you are not paying the full amount due, a charge off or other notation that an amount less than agreed was paid, is what you will end up with. 
  • February 20 2011
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Paid in full, definitely.  Charge offs hurt your credit. If you can leave the account open, even with a 0 balance, then it will be even better.  The largest portion that goes into your fico score is the length of history behind the credit rating; so when you close the account, then you lose that credit history and hurt your credit.  Also, by keeping the balance under 30% of the limit will fully optimize your credit rating.  Hope this helps.
  • February 20 2011
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Profile picture for Ray Stevens
Paid in full, definately.

Also, if you settle, that is considered a slight blemish as the creditor puts "Settleed - Paid in full for less than the full amount"
  • February 20 2011
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Paid in full will sometimes throw up red flags to the credit reporting agencies.  Without knowing more about your situation, I can't say anymore.  That said, I have a good friend that specializes in this area particularly, and I'm sure she would be glad to speak with you in more detail.  Just let me know.
  • February 20 2011
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I believe that paid in full, or account paid and closed will reflect better on your credit report.  However please keep in mind if there were any late payments made prior to resolving the asccount those will be negatives.
  • February 20 2011
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