What is a Charge-off & Can You Remove It? | LA Times Compare (2024)

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On This Page

    Key Takeaways
  • How do charge-offs occur?
  • Impacts of charge-offs on your credit reports
  • Can you remove charge offs from your credit report?
  • How to remove charge offs from a credit report
  • How to bounce back from a charge-off on your reports
  • Should you pay off a charge-off?
  • What you should (and shouldn’t) do when you have a charge-off account
  • How to avoid charge-offs
  • Glossary of terms
  • FAQ - Charge off on credit report

On This Page

  • Key Takeaways
  • How do charge-offs occur?
  • Impacts of charge-offs on your credit reports
  • Can you remove charge offs from your credit report?
  • How to remove charge offs from a credit report
  • How to bounce back from a charge-off on your reports
  • Should you pay off a charge-off?
  • What you should (and shouldn’t) do when you have a charge-off account
  • How to avoid charge-offs
  • Glossary of terms
  • FAQ - Charge off on credit report

Updated on AUG 14, 2024 7 Min Read

Why Trust Us?

  • A charge-off is an unpaid debt that your creditor gave up on collecting and was written off by the collections agency.
  • A charge-off has a negative impact on your credit score and will follow you for up to 7 years until it is eventually dropped from your record.
  • You cannot remove a charge off from your credit report, but paying it off can reduce the impact it has on your credit score.
  • You may still be able to get a secured credit card with a charge-off on your account, like the Capital One Platinum Secured Credit Card, Capital One Quicksilver Secured Cash Rewards Credit Card, or the Open Sky Plus Secured Visa.
  • Keep in mind that borrowers with debt that has been charged-off are still legally required to repay it.

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How do charge-offs occur?

Charge-offs occur when you are at least 120 days late paying a credit card bill or another debt you owe. This action means the credit card company or another lender is writing off your unpaid debt as a loss, and that they are closing the account permanently so no future charges can occur.

It’s also worth noting that charge-offs can occur even if you’re making payments on your account in an effort to get up-to-date. This typically happens when you’re making payments but they’re not sufficient to keep up with the minimum monthly payment amount required. Your account could also be charged-off automatically if you file for bankruptcy and your creditor receives notice.

Impacts of charge-offs on your credit reports

Note that you’ll see damage to your credit score when you have a bad debt that becomes a charge-off, but that the impact will actually come into play long before you get to that point. Since your payment history is the most important factor used to determine your credit score with the FICO and VantageScore scoring models, late payments and delinquency reported to the credit bureaus will cause considerable harm to your credit score first.

Your late payments will continue to damage your credit score as they are reported to the credit reporting agencies every month. If your lender and the collection agency or debt buyer reports to the three credit bureaus, you’ll eventually see a charge-off status noted in your reports for the unsatisfied debt.

That said, it’s worth noting that the impact on your credit score may be felt with one credit bureau (or a few) but not all of them. That’s because your lender and the collection agency may only report to one or two of the credit bureaus and not all three.

Can you remove charge offs from your credit report?

Like other negative items and reporting, a charge-off can stay on your credit reports for up to seven years from the date of the first missed payment. Worse, paying off a past due account will not remove the charge-off from your credit reports before this limitation is up.

In fact, paying off a past due debt will only update the status of the account. The charge-off will be listed on your credit reports as part of your credit history until it falls off automatically.

Eventually though, a charge-off or an amount in a collection account that is settled will be reported as paid by the lender, the collection agency or the debt buyer. This means that, even if this negative item remains on your credit reports, the impact on your credit score will likely lessen depending on the credit scoring model in use.

How to remove charge offs from a credit report

According to Experian, borrowers with unpaid debts that are charged-off are still legally required to pay them. This is true whether the original creditor still owns the debt, or if they have sold the debt to a collection agency or another type of debt collector.

That said, there are some steps borrowers can take to have a charged-off account removed from their account, or to at least diminish the effects of the negative item.

  • Step 1: Determine who owns the debt. Find out whether your original creditor still owns the debt, or if they have already transferred the debt to a collection agency or another type of debt collector.
  • Step 2: Contact the current owner of the debt to negotiate a payment plan or debt settlement. Reach out to the owner of the debt to find out if a payment plan can be set up. You can also inquire about settling the debt for less than you owe.
  • Step 3: Request a “pay for delete.” A pay-for-delete arrangement works exactly how it sounds, but you’ll have to negotiate this with your creditor and it’s not guaranteed. Basically, you agree to pay a cash settlement to have the charge-off removed from your credit report.
  • Step 4: Get your agreement in writing. Whatever you’re able to negotiate with your creditor, make sure you get the agreement in writing. This way, you’ll have proof of the agreed upon arrangement if something goes wrong.

Outside of these steps, you can also dispute charge-offs within your credit reports with the three credit bureaus — Experian, Equifax, and TransUnion. However, theConsumer Financial Protection Bureau (CFPB)says you typically cannot have negative information removed from your credit report if it’s accurate.

How to bounce back from a charge-off on your reports

If you wind up with a charge-off account because you’re more than 120 days late paying a credit card charge, a car loan, or any other debt, there’s not a lot you can do other than attempt to resolve it. You can negotiate a debt settlement agreement with the lender if they are willing to do so, but you may also be able to set up a payment plan. Either way, the charge-off will likely remain on your credit report for up to seven years from the delinquency date — the same length of time Chapter 13 bankruptcy stays on your credit reports.

That said, you can still take steps to treat your credit with better care in the future. For example, you can:

  • Make sure to pay all credit card debts and other bills early or on time
  • Start using a monthly budget that makes it easier to track bills and payments
  • Use various financial products to improve your credit score, including secured credit cards and credit builder loans

Whatever you do, make sure you’re never in the position to deal with a charge-off again. Over time, charge-offs on your credit report will have less of an impact on your credit score, and thus, your life. With enough time and responsible credit use, damage to your credit score resulting from a charge-off will even cease completely.

Should you pay off a charge-off?

You can pay off outstanding debts that have been charged-off by creditors, but you don’t necessarily have to. Just keep in mind that negative information on your credit reports like charge-offs and late payments can stay there for up to seven years. Also note that not paying off unpaid debts will have more of a negative impact on your credit than they will if you resolve them with a payment plan or a debt settlement agreement.

Generally speaking, you should pay off a charge-off if it’s legitimate since you are legally responsible for repaying the debt. After all, letting an unpaid debt that is charged off linger on your credit reports could significantly impair your ability to qualify for a car loan, a credit card, a personal loan, or a mortgage. Not only that, but paying off an outstanding debt helps you avoid being sued for non-payment, plus interest stops accruing on the unpaid balance.

However, charge-offs on your credit report that are errors should be disputed with the three credit bureaus and the company reporting the information.

What you should (and shouldn’t) do when you have a charge-off account

If you have an outstanding debt that is already late, you should expect the debt to be charged-off by the original creditor somewhere between 120 and 180 days. But, what should you do at that point? The chart below explains:

Charge-Off Accounts: What to Do Charge-Off Accounts: What Not to Do
Contact the original lender or the collection agency to inquire about your next best steps. Do not ignore the debt and expect it to go away on its own.
Determine whether you can pay off the unpaid debt with a payment plan or single cash payment. Do not let the debt continue to accrue interest over time.
Reach an agreement with the creditor that minimizes damage to your credit score. Do not leave the charge-off on your credit reports without action on your part.
Improve your credit score over time with responsible credit use, then reap the benefits. Do not pay higher interest rates and more fees each time you go to borrow.

How to avoid charge-offs

When it comes to dealing with unresolved accounts that remain unpaid, your best bet is avoiding the situation altogether. In fact, you should do your best to pay all your bills early or on time, even if you can only make the minimum monthly payment.

If you need help forming a plan that helps you keep up with your monthly bills and improves your credit over time, speaking with a credit counselor can help. Most credit counselors offer a free consultation, and they can help you get on track with bills and learn to budget your money so you can avoid bad credit and all the havoc it causes.

At the very least, sit down to write out a monthly budget or spending plan that helps you remember which bills you have and when each one is due. Avoiding late payments is considerably easier when you have some sort of plan in place, yet only you can make this happen.

Glossary of terms

Charge-off: A charge-off takes place when a creditor writes off an unpaid debt after the borrower hasn’t made payments for 120 to 180 days.

Credit repair company: Credit repair companies work with creditors to negotiate lower interest rates and settlements on behalf of their clients.

Credit report: A credit report is an up-to-date reporting of a consumer’s credit movements, including their payment history, balances owed, and more.

Credit score: Your credit score is a three-digit number that represents your overall credit health.

Debt collection agency: Debt collection agencies are companies that try to collect unpaid debts from borrowers.

Delinquency: Being one month late (or later) on a credit card bill or other debt means you are delinquent.

Late payment: The term “late payment” is used to describe any payment on a bill that is paid after its due date.

FAQ - Charge off on credit report

How to remove a charge-off without paying

The only way to remove a charge-off from your credit report without paying is to wait until it expires from your credit reports. After seven years, a charge-off will disappear from your credit report automatically. If waiting seven years is not an option for you, try to speak to the company that placed the charge-off on your account and negotiate a repayment plan. Repaying bit-by-bit can help rebuild your credit score.

About the Author

What is a Charge-off & Can You Remove It? | LA Times Compare (6)

Holly D. Johnson Finance Expert

Holly D. Johnson is an award-winning personal finance writer who covers topics like insurance, investing, credit and family finance. As a leading voice in the travel and loyalty space, Johnson has traveled with her family to more than 50 countries over the last decade.

The author has also written extensively on the power of household budgeting, and she even co-authored a book on the topic. Zero Down Your Debt: Reclaim Your Income and Build a Life You’ll Love was originally published in 2017, and it teaches families how to use zero-sum budgeting to reach their financial goals. She is also the co-owner and founder of the family finance and travel website, ClubThrifty.com.

Johnson’s 10+ years of writing have focused on helping families make important financial decisions at each stage of their lives. The author also applies the financial principles she teaches to her own life, and she is currently on track to retire in her late 40’s with her partner. She currently lives in Central Indiana with her husband and children, and she is a regular contributor for Bankrate, CNN, Forbes, U.S. News and World Report Travel and many other notable publications.

* Opinions expressed here are those of the LA Times Compare Cards Team and have not been reviewed or approved by any advertiser or entities included within this content. See our editorial policy for more details.

All products or services are presented in this content without warranty. The information, including card details such as rates and fees, is accurate at the time of publish. Please visit each bank's website directly for the most current information.

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What is a Charge-off & Can You Remove It? | LA Times Compare (2024)

FAQs

What is a Charge-off & Can You Remove It? | LA Times Compare? ›

A charge-off is an unpaid debt that your creditor gave up on collecting and was written off by the collections agency. A charge-off has a negative impact on your credit score and will follow you for up to 7 years until it is eventually dropped from your record.

Can a charge-off be removed? ›

Creditors are usually more willing to remove a charge-off when you can pay more rather than less of the debt. This is known as “pay for deletion.” Again, you should ensure you speak with someone with your creditor's company who can delete the entry. Before you pay anything, you should receive the agreement in writing.

Can a charge-off be forgiven? ›

Having an account charged off does not relieve you of the obligation to repay the debt associated with it. You may be able to remove the charge-off by disputing it or negotiating a settlement with your creditor or a debt collector. Your credit score can also steadily be rebuilt by paying other bills on time.

How long can charge-offs stay on your credit report? ›

Similar to late payments and other information on your credit reports that's considered negative, a charged-off account will remain on credit reports up to seven years from the date of the first missed or late payment on the charged-off account.

Is a charge-off worse than collections? ›

Charge-offs tend to be worse than collections from a credit repair standpoint for one simple reason. You generally have far less negotiating power when it comes to getting them removed. A charge-off occurs when you fail to make the payments on a debt for a prolonged amount of time and the creditor gives up.

How do you beat a charge-off? ›

What you can do is contact your original creditor. You can ask them—very politely—what it would take to have the charge-off removed. At the very least, they'll likely ask you to pay back a portion of what you owe. In this situation, some creditors may offer a “Pay for Delete” agreement.

How damaging is a charge-off? ›

So, while yes, a charge-off will lower your credit score, it usually happens only after four to six months of missed payments and consequential credit score reductions. By then, your score might already be in bad shape. Your credit could be damaged for seven years.

What is the 609 loophole? ›

2) What is the 609 loophole? The “609 loophole” is a misconception. Section 609 of the Fair Credit Reporting Act (FCRA) allows consumers to request their credit file information. It does not guarantee the removal of negative items but requires credit bureaus to verify the accuracy of disputed information.

Can a debt collector sue you after a charge-off? ›

Yes, you can be sued for a debt that has been charged off.

You may be sued, resulting in consequences such as a frozen bank account or wage garnishment. The court may issue a default judgment against you if you don't respond to a lawsuit.

Are charge-offs reversible? ›

If you see a charged-off account on your credit report and believe it shouldn't be there, send a debt validation letter to the collection agency to have the debt reversed. Pro tip: The Consumer Finance Bureau offers information on how to dispute your debt and a template to help you write your debt validation letter.

Is a charge-off worse than a repossession? ›

Is a charge-off better than a repossession? While you might get to keep your vehicle if your auto loan is charged off, both charge-offs and repossessions negatively affect your credit history and could impact your ability to qualify for a loan in the future.

How to remove charge-off from credit report without paying? ›

Dispute any inaccurate information

You can do this by sending a dispute letter to both the creditor and the credit bureaus that are reporting the charge-off. In your letter, clearly explain the reasons for your dispute and provide any supporting documentation if necessary.

What is the best letter to remove a charge-off? ›

The letter you send your creditor to remove your charge-off is called a “pay for delete” letter or a goodwill letter. Generally, you send a pay for delete letter if you haven't paid the debt and a goodwill letter if you've already paid.

Can you have a 700 credit score with a charge-off? ›

It is possible to have a 700 credit score when a default payment goes to collections. That being said, it's not likely your credit score will stay at 700 once this happens. Credit scores tend to drop once there's a report of collections.

What happens if you don't pay a charge-off? ›

Charged-off accounts and other negative marks stay on your credit reports for seven years. So if you choose not to pay, you will have to wait that long for the charge-offs to stop affecting you.

Is it worth paying a charged-off account? ›

There are some benefits to paying off a charged-off account: Better credit report notation. A paid-in-full status is better for your credit report than a settled status. Future lenders prefer to see that you've paid what you owe in full rather than settling for less.

Does a charge-off mean I still owe? ›

A charge-off doesn't absolve you of the debt you owe. You are still legally responsible for the unpaid debt, and it will take time for your credit score to fully bounce back from a charged-off account. However, addressing a charge-off as quickly as possible can help lessen the impact on your credit score in the future.

Can you buy a car with a charge-off on your credit? ›

Remember that the car loan charge-off will remain on your credit report for seven years. It will affect your ability to get more car loans. Loan charge-offs may force you to seek bad-credit auto loans with higher interest rates, so resolve the debt directly if you can.

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