Does A Credit Card Charge-Off Affect My Credit?
January 21, 2012
Many people are under the impression that when a debt has been charged-off that it’s been canceled by the creditor. This is the furthest thing from the truth. The fact remains you’re still responsible for paying off the debt. And although you’re still responsible for the debt you’ll not be able to use your credit card to make buys anymore.
Companies, including creditors and lenders, have profits and losses each year. They make money from profits and lose money from losses. When a creditor charges-off your account, it’s declaring your debt as a loss for the company.
Although the creditor has acknowledged your debt as a loss in its financial records, you don’t get away debt free. Your creditor will add a negative entry called a charge-off to your credit report and will continue to attempt to collect on the debt.
An account is usually charged off after 180 days, or six months, of less-than-minimum payments. The charge-off will remain on your credit report for seven years from the date it was charged-off. If you pay the debt, it will be updated with a status of “Charged-Off Paid” or “Charged-Off Settled.” Either is better than a easy “charge-off” status, but both are still undesirable.
The only way to remove a charge-off from your credit report is to wait the seven-year period or negotiate with the creditor to have it removed after you pay the account in full. This will update your credit report with a status of “Paid in full”.
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