- Understanding Why a Debt Becomes a Charge Off
- How Charge Offs Affect Your Credit Score
- How Long Do Charge offs Stay on Your Credit Report
- How I Removed Charge Off From My Credit Report
- 1. Offer to Pay Creditor for Deletion
- 2. Use the Advanced Method to Dispute the Charge Off
- 3. Have a Professional Remove the Charge Off
If you have recently pulled your credit report and noticed a charge off, you might be wondering what that means and how you can get a charge off removed from your credit report.
First of all, keep in mind that a charge off entry on your credit report is a big deal and will likely result in huge credit score drop. Therefore, it’s really important that you get charge offs removed because otherwise a charge off will stay on your credit report for seven years.
Let’s get into what options you have available.
Understanding Why a Debt Becomes a Charge Off
When you haven’t paid on an account for 6 months to a year, creditors will often mark the account as a “charge off”. This means that the creditor has determined they’ll likely be unable to collect on the debt so they are claiming it as a business loss. This is basically done for tax reasons.
However, just because it’s marked as a loss doesn’t mean they will stop attempting to collect on the debt. In fact, they might even hire an outside company to handle the collection process. This is important to understand in case you’re contacted by a collection agency you don’t recognize. Either they purchased the debt from the original creditor and are attempting to collect on it, or they have been commissioned by the original creditor to collect the debt.
How Charge Offs Affect Your Credit Score
Once an account has been charged off, two things will likely happen right off the bat. First, you’re going to start receiving calls and attempting to collect on the debt. Second, the account will be marked as a “charge off” on your credit report.
A charged off account on your credit report will devastate your credit score. A single charge off can cause your credit score to drop 100 points or more. It’s a big deal.
In addition to your credit score dropping, you’re also going to have a real difficult time getting approved for any new credit cards, mortgages, or auto loans. Lenders rarely extend credit to people with even one charge off on their credit report.
Paid Vs. Unpaid Charge Off
There are two types of charge offs that could appear on your credit report. If you have paid the charged off account in full, it will be marked as “paid”, if you haven’t it will remain marked as unpaid. Some collection agencies might try to convince you that if you pay the charge off in full, your credit score will completely recover. This is not true.
A paid charge off will definitely look better to lenders who do manual underwriting, but it will have a minimal effect on your credit score. Also, paying off the charge off won’t automatically delete the entry from your credit report.
High Vs. Low Credit Scores
As with all negative items on your credit report, the higher credit score you have prior to the negative entry, the more of an impact it will have. That is, if you already have multiple negative items on your credit report, and your credit score is low, an additional charge off won’t cause a significant drop in your credit score.
However, for those of you who have a high credit score with no negative entries, getting a charge off will likely cause a significant drop in your credit score.
How Long Do Charge offs Stay on Your Credit Report
A charge off will remain on your credit report for seven years, and then it’s automatically deleted.
For example, if you stopped making payments on one of your credit cards for 6 months, and it was marked as a charge off on January 1st, 2017, it would remain on your credit report until January 1st, 2024.
New Vs. Old Charge Offs
The good news is that as the charge off ages, it has less of an impact on your credit score. In other words, you will see a significant drop in your credit score right when the account is charged off, but as time goes on, and if you don’t have any other negative items added, your score will slowly improve with time.
Regardless of your credit score, it will still affect your ability to get loans for the full seven years unless you remove the charge off from your credit report. I was able to get a charge off removed by using the following techniques.
How I Removed Charge Off From My Credit Report
To remove a charge off, you have two primary options. The first set of techniques fall under the “do-it-yourself” method. This method can take some time and patience but you’ll learn a lot along the way, and using the techniques below, should have success in removing the charge off entry.
The other option is to have a professional credit repair company, such as Lexington Law Credit Repair, remove the charge from your credit report. This method is generally quicker and obviously requires a lot less work on your end.
The good thing about hiring a professional is that they deal with collectors all the time and have therefore become very good at getting negative items removed from credit reports. This is also a good option if you’re weary about dealing with debt collectors.
Do-It-Yourself or Not?
In deciding whether you should go the do-it-yourself method, the main decider will more than likely boil down to how quickly you want the charge off removed. If you’re trying to get pre-approved for a mortgage, you’ll need to remove it quickly because mortgage lenders usually don’t lend to people with outstanding debts such as charge offs and collections.
I’ll go more into what to expect when hiring a professional in a bit, but first let’s get into the do-it-yourself techniques that have also shown success in getting charge offs removed from your credit report.
1. Offer to Pay Creditor for Deletion
One of the most effective ways of getting negative items removed from your credit report is to offer to pay the debt, and in exchange the creditor agrees to remove it from your credit report.
This method obviously only works on an unpaid charge off. That is, if you’ve already paid the charge off but it’s still on your credit report, you really don’t have any leverage to negotiate for a removal.
Before You Pay the Charge Off
Before you decide to go the “pay for deletion” route, there are a few things you need to keep in mind.
- If it’s an old charge off, don’t offer to pay the debt in full. Rather, you should try to negotiate for less than what they are asking. Start with 50% and go from there.
- Some creditors will claim that they can’t legally remove the charge off. This isn’t true. Continue to negotiate until a deal can be made.
- You can negotiate over the phone, but always get the agreement in writing before sending them a check.
- Never give a debt collector access to your bank account.
2. Use the Advanced Method to Dispute the Charge Off
If you don’t have the money to pay the balance in full or you’re unable to get the original creditor to agree to remove the charge off from your credit report, the next step is to dispute the negative entry using an advanced method.
In order to dispute the entry using the advanced method, you’ll need a copy of your current credit report. Next, find the charge off entry and look at every detail to ensure that everything is completely accurate. The key here is to be very specific. If anything is inaccurate you have the right to dispute the entire entry.
Here are a few details that you should be verifying are accurate:
- Account Number
- Creditor Name
- Open Date
- Charge off Date
- Payment History
If you find any information that isn’t correct, write a letter to each of the 3 credit bureaus stating that there is incorrect information that needs to be corrected or removed. You should list out the inaccurate information in your letter.
If the incorrect information can’t be verified, they’ll have to correct or remove the charge off. Many times the information simply can’t be verified and the entry will be removed.
3. Have a Professional Remove the Charge Off
Lastly, if you’re the type of person who would rather have a professional handle it and just be done with the whole thing, I suggest you check out Lexington Law Credit Repair. They’ll take care of you, and honestly they usually get stuff removed a lot quicker. Give them a call at 1-844-764-9809 or Check out their website.
Have other techniques you have used to removed charge offs from your credit report? I’d love to hear about them in the comments below.