Should you pay the amount due on your credit card?

Understanding how this will affect your credit

What is the amount due?

If you have not made the minimum payment for over 180 days, the lender is likely to consider your account due and declare it no longer an asset. When lenders close accounts, they consider them a loss and record it in their accounting records. As a result, the lender may owe the federal government a slightly reduced amount.

Should you pay the amount due on the credit card?

Although the credit card issuer has declared a loss on your account, you are still responsible for repaying the debt. The issuer may (and likely will) attempt to collect the debt and may charge or sell the debt to a third-party collection agency that will handle the collection activities.

What if you don’t pay the amount due on the credit card?

If you decide not to pay the amount due, it will remain listed as a delinquent debt on your credit report. As long as the amount due remains unpaid, you may find it difficult to get approved for credit cards, loans, and other credit-dependent services (like an apartment).

Settlement option

Depending on the age of the amount due, you may be able to negotiate a lower payment to settle your obligation. The issuer may agree—but is not obligated—to accept a portion of the outstanding balance and forgive the remaining amount. This process can be lengthy, and there are no guarantees.

How the amount due affects your credit

The credit issuer will report the amount and status of the debt to credit bureaus, and it will be included in your credit report. The delinquent status will remain on your credit report for the full credit reporting period (which is seven years from the date of delinquency) whether you pay it or not. It should be noted, however, that you still owe the amount due even after it has been removed from your credit report.

You can dispute the amount due on your credit report if it is incorrect or has been reported inaccurately.

Even after paying the amount due, the account will not be removed from your credit report or erase the previous delinquent status. After full payment, your account will reflect a zero balance. Although paying the amount due does not immediately help to raise your credit score, it makes you look better in the eyes of potential issuers and lenders, increasing the likelihood of approval for future applications.

Source: https://www.thebalancemoney.com/do-i-have-to-pay-a-charge-off-960424