Ask Me Help Desk - Credit report : what it means

1) What is meant by Charged off account, Account closed by credit grantor and Collection account?
2) If my credit report for one account says date opened 1999 and is charged off and also says account closed by credit grantor; does this mean that I do not have to worry about paying this off since the account is too old?

Quote:

Originally Posted by important

1) What is meant by Charged off account, Account closed by credit grantor and Collection account?
2) If my credit report for one account says date opened 1999 and is charged off and also says account closed by credit grantor; does this mean that i do not have to worry about paying this off since the account is too old?

No, it's means that your credit score is really hurting and you're going to have a collection agency pounding down your door.

When a creditor puts "charged off" on your credit report it means that they no longer believe that you will pay them, and they have written the debt off, which usually means that they have sold your debt to a collection agency for pennies on the dollar. The collection agency will then hound you until you pay what you owe or settle for an amount that they believe is fair. They can go as far as to take you to court to have a judgement placed against you.

Account closed by credit grantor means that, in the case of a credit card, they have basically taken your privileges away. Even if there is a balance on the card you can no longer use it because you did not make you minimum payments on time or at all. Even if you do pay the balance due to the creditor they no longer want to do business with you. It's very negative on your credit because it's like a warning to other creditors saying "Watch out! This person does not pay!"

If you ever want a good interest rate on a home or a car ever again, I'd work on getting this fixed ASAP!

Thanks a lot.

Basically, no matter what it is... whether charged off or collection account... U would suggest me to pay it... Right? But, if the account is very old, maybe 7 yrs or more... what do I do? What if I am not in a position to pay? Even if I negotiate and pay, will my credit score recover?

Yes, pay it. If you can find out who the collection agency is then send the what you can afford. (It can be $5, but you have to pay that every month until your debt is paid off.) If you just start sending them money you can't get trapped into a "deal" with a collection agency, that's what I did. You can find out if you account went to collections by contacting your creditor or looking at the "collections" portion of your credit report. Also find out if you can make payments directly to your creditor. When the collection agencies buy your debt they end up charging you all kinds of fees. Ex: Your debt was $200. Collection agency bought it, and now they are reporting that you owe $1200. They have to make money some how, so they charge you for attorney fees and things like that. It's stupid, and they are not nice or understanding people. I have a deep HATE against the collection agencies of the world!

The 7 years thing you are referring to is, a collection will typically be removed from your credit 7 years after it's paid off. (I think it also has something to do with the statue of limitations for when a collection agency can sue you.)

As for your credit recovering, yes it will. It just takes time. I was laid off in late 2001. I ended up getting WAY behind on all my bills because unemployment was less than half of what I my salary was. I almost had my house foreclosed on, did a short sale instead. My credit score when from 820, which is almost unheard of, to 490 in a matter of months. It is now 5 years after the crap hit the fan, and I've been able to get my score back into the low 700's.

Just to add to the fine points made by shelley7180. Derogatory items SHOULD drop off your report 7 years from the date of last activity (except a Bankruptcy which stays for 10 years). Sometimes this date of last activity is tenuous. If you start negotiating with the creditor or paying on the debt, you might reset the 7year clock. Since a derogatory item affects your score less the older it gets, you might even LOWER your score by paying off a 6 1/2 year old collection/charge off, because the activity date is now recent. Even though it may be morally right to pay off an old debt, it could hurt you. Sometimes it is best not to poke the sleeping badger with a stick.

Thanks a lot for the inputs.

Basically, if I choose not to pay the earlier accounts, how do I improve my credit score. Will having a pre paid credit card help? What are the other options?