How many points does "settled debt/charge off" mean for FICO?

A client just settled a Home Equity line for less than owed. She was never late on a payment.

The notation just showed up on her credit report.

She has sterling credit and no other late payments of any kind.

Anyone have an idea of how many points she will lose on her 768 FICO score ?

I am no expert on the inner workings of FICO but I would suggest that your client’s “stellar” credit is now down the tubes. Charge-off is the worst end result of any credit decision. Lenders expect their loans to be repaid and having to charge-off all or part of any debt is a very poor reflection upon the borrower. My understanding is this statement will remain on the credit report for 7 years.

It’s a hit to her score. For scoring purposes it’s really no different than a foreclosure but who knows if that will change in the future. But short sales or settling accounts for less then owed ( same thing)makes recovery faster and makes new loans available faster. A short sale recovery time is 2 years while foreclosure is 5 years.

i would think a charge off you could settle it then have it removed from your credit?

RE: i would think a charge off you could settle it then have it removed from your credit?

A bank is not going to take a settlement for deletion of derogs on your credit report. Typically only debt collection agency will do that and that is only for the debt collection agencies trade line not the original creditors so it wouldn’t apply here. That’s not to say you couldn’t dispute it.

with everything I have saw recently everything seems to be negotiable?

Not that not with the banks. It could damage the relationship they have with the 3 major credit reporting agencies

If her score is 768 even with the charge off on her credit report, then her score has already taken the hit.

Charge offs can stay on the credit report seven years, same as a foreclosure.