Dec. 12, 2009 - What is a Charge-Off?

A charge-off is a debt that is deemed uncollectible by the original creditor and is subsequently written off. Charge-offs are classified as 'bad debts' on the creditor’s income statement and are removed from the balance sheet. When a creditor charges-off your account, it's declaring your debt as a loss for the company. The creditor then usually sells or assigns the bad debt to a collection agency.

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Typically charge-offs occur after six months of non-payment, but sometimes much sooner. Many people mistakenly think when a debt has been charged-off that it's been canceled by the creditor. This is not true. You are still responsible for paying off the debt. Your creditor will almost always add a negative entry to your credit report and continue to attempt to collect on the debt. Charge-offs remain on your credit report for seven years from the date the account was first reported.

If you pay the debt, it will be updated on your credit report to "Charged-Off Paid" or "Paid Collection”. Either is better than a simple "charge-off" status, but are still undesirable and counted as a negative item on your credit report for seven years.

The only way to remove a charge-off from your credit report is to negotiate with the creditor to have it removed after you pay the account in full or dispute the account with the credit bureaus such as Equifax, Trans Union and Experian.

If you decide to negotiate with the creditor, make sure you get their intent to remove the negative mark from your credit report in writing before you settle your debt.

If you decide to dispute the account, you will want to either learn how to repair your credit or hire a credit repair firm to do it for you. Once you have disputed the negative account, the credit bureaus then supposedly contact the creditor. If the account can not be verified by the creditor, it must be removed from your credit report immediately.

Mar. 4, 2008 - RE: What is a Charge-Off?

 Hi Chane, 

Thanks for the blog.  I have a question that everyone seems to have a different answer too.  I have a charge off on my credit report that I would love to have removed.  I am able to afford the payment in full; however, this charge off was about 5 years ago.  If I pay the outstanding dept and they do in fact remove the charge off, does this reactivate this derogatory payment or "seriously past due" statement on my credit for an additional 7 years or is it still the date at which the payment went derogatory?

Thank You

Mar. 21, 2008 - RE: What is a Charge-Off?

Jul. 24, 2009 - RE: What is a Charge-Off?

Hi , what happens if my house was in forclosure and the bank sell it to a creditor and i dont pay the creditor does the house go into forclosure again and can i file bankrupt on this and cut my loses.

Mar. 6, 2011 - RE: Remove charge off on a rental house

I have rental house, that had a balance of $40,000 owed to a mortgage loan company.   When I replaced a whole complete roof, the tarps continued to blow off the roof, and the whole inside was destroyed.    All of the drywall was runied, which left very much mold.   I mailed many pictures to the loan company, and they charged the balance off.  I do not understand how the loan could be sold to a collection agency, then be able to collect on the balance from the goverrnment, while the collection agency is attempting to collect from the owner of the house. My question is }  Can the Loan company sell the charged off loan to a collection agency  and still write off the loan balance?

Jan. 19, 2012 - Problems with the bank

My mom had a house in Alabama and they put it on my credit and when i called about it they said they couldn't come up with contract. What can i do about this? I live in Texas now since i got out of the Army . Thanks

Apr. 1, 2012 - RE: What is a Charge-Off?

Nothing crushes a credit score like being charged off.  Well... allow me to back up a little; a bankruptcy is worse.  In my less responsible days I got a little behind on my bills and was charged off by my call phone provider.  My credit score took a hard nose dive after that!