How to Remove a Charge-Off From Your Credit Report

Posted on February 22, 2022 in Credit Cards

If you’ve been wondering how to remove a charge-off from your credit report, this post is for you.

Bad things sometimes happen to good people. When it comes to credit, you can be trying to do everything right, but life has other plans. The truth is life happens — divorce, illness, loss of employment, grown kids. And we go from living a good life with good credit to barely making it or charging up credit cards just to make ends meet.

In all of this, it is possible to have a charge-off accurately reflected on your credit report. But no one wants a charge-off on their credit report. Yet, this is the case for so many adults. The Federal Reserve reported a delinquency rate of 1.96% for American consumers for the fourth quarter of 2020. That means many are suffering the consequences of a charge-off, which includes a seven-year credit history as a bad lending risk and a low credit score.

What Is a Charge-Off?

A charge-off means your account has been written off as a loss to the lender. When we receive credit from a lender, there are terms in the loan agreement that stipulate when to pay the bill and how much the bill will be. The agreement outlines the number of months it will take to repay the loan based on the amount of interest you’re also being charged for the loan. When you sign the loan agreement, the assumption is that you will adhere to the terms of the agreement. That means paying the loan amount that’s due every month — on time. When we miss payments or fail to pay on time, there are consequences that are also outlined in the loan agreement.

Failure to repay the loan over a specified period of time can result in a charge-off. A charge-off occurs after 120 to 180 days of missed payments on a loan. At this point, the account can be assigned or sold to a debt collection agency. While you may not receive bills from the original lender, the debt collector can continue to take action against you to get you to make payments.

How Does a Charge-Off Affect Your Credit Score?

A charge-off is one of the worst things to have on your credit report. Even though you may feel free from having to repay the debt because the lender no longer bills you monthly, you still owe the debt, and the collection agency reminds you of it. Failure to pay them still affects your credit negatively; instead, now it’s a double whammy. You not only have a charge-off on your credit report, but your credit is also taking a hit for failure to pay the debt collector.

  • A charge-off is an immediate alert to potential lenders that you cannot be trusted to pay your bill. When other lenders see this on your credit, they will know to immediately deny any credit you apply for.
  • A charge-off stays on your credit report for seven years. That means the next seven years are off-limits for any credit you may need because the likelihood of being approved is minimal.
  • A charge-off will directly affect your credit score by causing it to drop many points. In addition, the collection agency is also reporting your non-payments, putting even more strain on your already deflating credit score.

Steps To Remove a Charge-Off From Your Credit Report

There are a few things you can do to try to get a charge-off removed from your credit report. However, if the charge-off is accurate, your futile attempts may be of little help. If the charge-off is inaccurate, you will definitely want to dispute it. That being said:

  1. Determine as much as you can about the debt. Collect as much information as you can about the debt, from the time it started to the present. Track your payment history. If it turns out you have reason to dispute the charge-off, you have hope. Federal law allows you the opportunity to dispute the inaccurate reporting with the credit bureau that’s reporting it. The credit bureau will then investigate your claim, and if it is in error, they will remove it.
  2. Negotiate a pay-for-delete arrangement. If you find that the charge-off is accurate, you can try to negotiate a pay-for-delete arrangement with the original lender. That means you’re asking the lender to remove the negative reporting from your report in exchange for a lump-sum payment. This payment may be a portion of what is owed. Some lenders will bargain with you, knowing they would prefer to receive some form of payment than nothing at all. But even though pay-for-delete is a legal arrangement between a borrower and the lender, the lender is not obligated to settle. There is no guarantee they will agree to this. If they do agree, be prepared to pay an amount closer to the amount owed than less. That means you should have a modest lump sum of money available that you can immediately turn over to them if they agree. Here are some hard and fast rules that accompany pay-for-delete:
    1. Don’t offer to pay the full amount of an old charge. Start negotiating at 25% and go up from there. Based on your financial situation, know the amount you are willing to negotiate up to.
    2. It is likely the lender will tell you they can’t legally remove the charge-off. That is not true. Continue to negotiate until a valid deal is made.
    3. Even if you negotiate over the phone, be sure to follow up with all the details in writing. Do this before you pay the lump sum. Keep copies of all correspondence between you and the lender in the event they fail to remove the charge-off after the lump sum payment is made.
    4. Never give a lender access to your bank account by providing them with bank information. Doing this could result in them taking the funds from your account without your authorization.
  3. Work with a credit repair agency. If you find that you are unsuccessful in going it alone, you can contact professional credit repair agencies to see if they can help get the charge-off removed. This will save you time and energy, but it will likely come with a cost. Credit repair agencies usually charge a fee for service. Keep in mind, however, that what you pay them to do, you can also do yourself.

FAQs about How to Remove a Charge-Off From Your Credit Report:

How do you remove charge-offs from your credit report?

You can dispute an inaccurate charge-off through the credit bureau to get it removed or you can try to negotiate a pay-for-delete arrangement with the lender to get it removed.

Can you delete charge-offs?

It is possible to have inaccurate charge-offs deleted by contacting the credit bureau to have them investigate the negative reporting. If they find the reporting to be inaccurate, they will remove it. If the reporting is accurate, you will likely have to pay a significant lump sum to get the charge-off removed through negotiations with the lender.

Should I pay off charged-off accounts?

Charge-offs will be on your account for up to seven years. If you’re not able to negotiate a settlement, the charge-off will remain. When the seven years are up, you will still owe the debt, but it will no longer be on your credit report, nor will it impact your credit score. Since legally, you still owe the debt, you have the option to pay it off.

My charge-off has been paid. Now what?

If you pay your charge off, it will reflect as paid on your credit report. However, that does not change the fact that it was a charge-off. The charge-off will stay on your credit report and will have minimal impact on your credit score.

Do charge-offs go away after 7 years?

After seven years, the charge-off will disappear from your credit report and will no longer impact your credit score.

What if a credit repair agency wants me to pay them before any work is done?

Be wary of any credit repair agency that asks for money upfront or promises to get your charge-off removed. There is no guarantee they will be able to negotiate with the lender. Credit repair agencies that make these types of promises and ask for money upfront are likely scamming you.

Can I Rebuild My Credit Score After a Charge-Off?

As long as the charge-off is on your credit report, it will negatively impact your credit score. After seven years, it is likely your credit will need repairing. The good news is that with time the negative information does eventually disappear. It will take some additional time, but the overall impact will eventually lessen. In the meantime, you can use this time to be diligent in making on-time payments with all your other lenders. That will cause your credit score to look better over time. In time, you can rebuild your credit score.

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