Everyone on this board is right on the money. Cap 1 is crap to deal with. In essence, they won't deal. But i don't understand the reasoning behind settleing a charge off vs. your report saying 'this debt has not been satisfied.' Why doesn't this help your credit score? I'm settling with two cap one accounts because i just get tired of seeing that 'collections account/charged off as bad debt' every time i look at my report. These accounts are less than a year old. is there a chance it will help my score at all when I pay them off, even if it is a settlement? it is very disheartening.
Paying off a Charge Off, either in full or settling for less, does not help your credit score. It does help if you are applying for credit, as it shows you no longer have the debt. The reason paying/settling does not help your credit score is the fact that you have already "defaulted" on the debt, this cannot be undone by paying. A credit score is a "probability number" of the risk of you defaulting on a debt. Whether paid or not, the fact that it occurred is all that matters for your credit score.
Actually, allowing a charge-off to simply age will improve your credit score insofar as the date of status becomes less recent. Conversely, paying an account sometimes brings the date of state or date of last activity to the date it was paid and will actually ding your scores for the immediate future because it appears brand new. However, over time the positive effects of zeroing out the balance and thus, improving utilization on the account will offset the date of last activity and a little more. Plus, it looks better on a manual review, some creditors will not touch a recent unpaid charge-off, and Capital One will likley sue if the debt is any amount of money at all.
