What is a charge off?
A charge-off is an unpaid debt on your account that has been cancelled by the creditor. It’s the result of not making your credit card payment for several months – usually six months in a row. The creditor writes off the debt as a loss, cancels your account, and demands the past due balance in full.
Many people mistakenly think when a debt has been “charged-off”, it means that it’s been forgiven by the creditor. Don’t let the name fool you. In fact, a charge-off is one of the worst types of credit report entries. By the time your account is charged-off, it’s already been closed for several months, and the debt has been handed over to a debt collections agency for action.
Note that any debts you may have paid after they were charged off will not be removed from your credit report. If you pay off the debt, it will be updated with a status of “Charged-Off Paid” or “Charged-Off Settled.”
Either of these entries is better than a simple “charge-off” status, but it does not change the fact that you had become delinquent with the debt because it indicates that offering you credit involves an element of risk.
How long a charge-off will remain on your account.
A charge-off will remain on your credit report for 7 years from the date it was charged off. In total, the account remains on your credit report for seven and a half years. Once you pay a charge-off, the listing isn’t erased from your credit report, at least not until it’s more than seven years old or until you negotiate its removal.
A charge-off can cause significant damage to your credit score and borrowing power for as long as it is registered on your account. As you can expect, creditors and lenders take charge-offs very seriously, so it is something you need to take very seriously.
Here are a number of sources that discuss how to remove a charge-off from your account.
Bettercreditblog.org – 3 ways to remove a chargeoff from your credit report.
USNews – Steps to remove a charge-off from your credit report.