A late payment is bad enough to have on your credit report. Even worse is a charge-off, meaning the creditor has written off your account as a loss. However, this is an accounting process on their end. While the asset has been taken off the company’s books, you are still responsible for paying the debt. Non-payment of credit card balances and loans can have a tremendous impact on your credit score. Under some circumstances, you might be able to remove a charge-off from your credit report.
How Do Charge-Offs Affect Your Credit History?
Future creditors see a charge-off as a risk you may not pay all your obligations. The creditor that issued the charge-off will likely cancel your account. Your credit limit might be reduced or you may be denied any future applications for a credit card.
Even if you pay the account after it is written off, it will be listed on your report as a “paid charge-off”. But it’s not the original lender you will pay. The account by this point has been forwarded to a collection agency; if you pay then, it will be reported as a “paid collection”. A charge-off remains on your credit report for 7 years following the date of the first missed payment.
A charge-off can cause a huge drop in your credit score. Having just one can shave off 100 points or more. You can avoid collection activity or legal judgments by arranging to pay a charged-off account, which over time can increase your credit score.
Tips to Remove a Charge-Off From Your Credit Report
The best strategy is to pay the debt in exchange for the charge-off being removed from your credit report. But before doing this, contact your creditor or lender. You may be able to negotiate with them or at least convince your creditor to remove the information (even if they say they can’t legally do so). This only works if the charge-off is unpaid; you won’t have the leverage to negotiate if you’ve already paid it.
The process can be managed over the phone. However, always get the agreement in writing before you pay any charge-off, preferably on company letterhead. You can also send a copy of the agreement you negotiated to the person who is working with you. Request a return receipt and have them sign and return a copy to you.
Do not pay until you can be absolutely certain someone who works for the creditor agreed to the arrangement. This will avoid any conflicts of interest, dealing with a third-party debt collector, and uncertainties as to your responsibility if the creditor doesn’t remove the charge-off from your credit report later.
What If My Creditor/Lender Doesn’t Comply?
A charge-off, like other negative information, will have less of an impact on your credit score over time. But it may be impossible to get a new credit card, mortgage, or auto loan if you have past-due accounts. This is true even if after the statute of limitations on collections activity has expired (starting payments or promising over the phone to repay can reset the timeline). If you want expert advice on how to remove a charge off, it’s best to work with a professional credit repair service.
Contact American Credit
Don’t take a chance by trying to resolve the situation yourself. At American Credit, we provide expert credit restoration, credit repair, and consultation services in Los Angeles, Santa Monica, and throughout Southern California. Our team will help analyze your situation and apply a pre-litigation process to repair your credit and remove negative information from your credit report. Call 877-856-4999 today for your free Credit Repair Consultation.