After 121 day of not making a payments to an account it is consider a charge off. A charge off is also known as written off or profit and lost.
A charge off account does not mean that you no longer owe the debt. A charge off will affect your credit report negatively. The account will stay on the report for seven years from the original delinquency date of the debt. In some cases the account is transfer of sold to another collection agencies to collect the debt. On your report you may have the creditor`s account and the collection agency account. The original creditor account should be reported with zero balance and only the collection agency that is collecting the debt should have the balance reported.
Paying off your charged off account would result in the account being updated to show “Paid,” but it would not extend the amount of time the item will remain on your report. The seven year time frame is calculated from the date of the first delinquency leading up to the charge off status, so the date the account will be removed will not change.
Paying off a collection account won’t necessarily result an immediate surge in your credit scores, but it may help reduce the impact over time, and it could be beneficial if your report is reviewed manually.