How to Increase Your Credit ( FICO) Score Part Three

Charge-offs

In part one of how to increase your credit or FICO score, I went over several methods that could potentially help your credit score. The methods that I mentioned included paying debts on time, paying down available balances, and not over applying for credit. In part two, I went over how collection account can effect ones credit score and how to try to eliminate these from your credit reports. In part 3 I want to talk about one of the worst type of account that can appear on a person's credit report. This type of account can drop ones FICO credit score up to a hundred points or more. This type of account is a charge-off account. There are two types of charge-off accounts. These two types are paid and unpaid charge-offs. The purpose of this article is to try and show you how to deal with these types of accounts and how to fix these so your credit score will increase.

The first type of charge-off account is an unpaid charge-off. This is when a person has failed to pay a payment for over a hundred and twenty days or more. The original creditor gives up on the account and charges the account off. This is basically the way companies write debts off their books. An unpaid charge-off is one of the worst things that a person can have on their credit report. An unpaid charge-off account will stay on your account for over 7 years. This looks very bad on a credit report because it shows that a person does not honor their debts.

The second type of charge-off account is a paid charge-off. This is when an account has been charged-off, but is later paid in full. This looks a lot better in a manual review of your credit report if someone is looking over your credit history. The person will see that the debt was settled and the person ended up paying the debt.

So it seems like the simple solution to an unpaid charge-off would be to pay the debt and change the status of the account to a paid charge-off. While this looks good on a manual review, the sad part is that it will hardly have any effect on your score.