Charge off and collections on a credit report must always be addressed. Sometimes the charge off or collection is paid off or has not reported delinquent in many years and as a result, is no longer affecting the credit score. In this case, a simple written explanation will be required. However, if the collection/charge off is outstanding and pulling the credit score down, then the collection and/or charge off needs to be paid in full.
A common misconception regarding collections and charge offs is that the debt automatically comes off the credit report after seven years. This is only true from the last reporting date. In other words, if you defaulted on a debt in 2008 but that debt is still reporting delinquent as of 2014, the seven years begins in 2014.
Also - if the charge off/collection has been in dispute, the dispute must be resolved and the credit report will need to reflect the dispute has been resolved.
I believe one of the biggest issues a consumer faces when trying to obtain a home loan is unresolved collection and charge off accounts. If you KNOW you have charge offs and/or collections, then don't ignore them. The sooner they are addressed, the better.
In the case of a large default such as a student loan debt or back child support payments, the lender may accept the outstanding amount as long as you can prove you have made a payment arrangement with the creditor and can prove the payments have been made on time for the past twelve months. This is of course contingent on the credit score being where it needs to be.