Paying Charge-Offs Won't Always Increase Your Credit Score

A "charge-off" is an uncollectible debt. Companies report charge-offs to the credit bureaus, which lowers your credit score. Although you would think that paying off these accounts would raise your score, that is not always the case.

Significance

Paying off a charged-off debt does not remove it from your credit report, but updates it from "unpaid" to "paid." Although this will have a positive effect on your credit rating, the item will still remain on your credit report for seven years.

Time Frame

Old debts have less of an impact on your credit score, according to MSN Money. Paying off an old charged-off debt makes the debt more recent, which can lower your credit score.

Considerations

Check the balance of charged-off accounts on your credit report. If the balance says "zero," as often happens when accounts are turned over to collection agencies, paying it off will not raise your credit score.