How to get charge offs removed from your credit report

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A charge-off is poison for your credit score. It’s a serious negative entry on your credit report, and it can harm your chances of getting competitive deals on loans or credit cards. It could even make it hard to get approved at all. It’s not easy to get a charge-off removed from your credit report unless it’s a mistake. It may still be possible. Here’s what you need to know.

• What does a charge-off mean?
  • A charge-off does not mean your debt is forgiven
• How to remove charge-offs without paying
  • Negotiate
    • What if the creditor won’t budge?
• Dispute the charge-off
  • Send a pay-for-delete letter
  • Should I get help from a credit repair company?
  • Watch out for this “credit repair” tip
  • Should you pay charged-off accounts?
  • Pay off debt from other accounts first
  • How to determine if you have charge-offs or collections on your credit report
  • How does an unpaid charge-off affect your credit score?
  • Is a charge-off worse than a collection account?
• What if my debt is overwhelming?
  • Negotiate a payment plan
  • Try a goodwill letter
  • Credit counseling/Debt Management Plan
  • Debt consolidation
  • Talk to a bankruptcy attorney
• The bottom line
• FAQs

What does a charge-off mean?

A charge-off appears on your credit account when a creditor gives up on collection efforts, closes your account, and writes your debt off as a loss.

If your payment is overdue, it will be recorded on your credit account as a late payment. That’s bad for your credit. When your creditor decides to write off the account, the status moves to “charged off”. That is much worse for your credit.

Most creditors will charge off accounts after roughly six months, but the time frame may vary.

A charge-off is not a collection account. If your creditor sells your account to a collection agency, the balance on your charged-off account will go to zero. The charge-off will still appear on your credit report for seven years from the date of the first missed payment.

The collection agency will open its own account with the credit bureaus, which will appear on your credit report as a separate collection account.  

Points to remember:

• You still owe the debt. A charge-off does not remove your liability.
• Your account may go to collections. If it does you’ll be dealing with a collection agency instead of your original creditor.
• Your credit score will fall. A charge-off is a serious derogatory record that will have a significant impact on your credit score.

There is no sure way to remove a charge-off from your credit record unless you can prove that the debt isn’t yours or the entry is inaccurate.

A charge-off does not mean your debt is forgiven

Charge-offs do not make a debt go away. You’re still legally obligated to pay the outstanding amount. As long as the debt appears on your credit report you can contact the creditor to make payment, which will change the status to “paid charge-off”

The listing will remain in your credit history, but most lenders view a paid charge-off as a less damaging record than an unpaid charge-off.

There’s no sure way to get a charge-off removed from your credit report unless it’s an error. It’s still worth trying. Here are some methods that may work.

Negotiate

If the creditor has not yet sold your debt, try to negotiate a payment arrangement. This could be a payment plan or a settlement that allows you to pay less than the full amount.

If you’ve missed several payments due to a one-time major event like a medical crisis, mention that. If you have a positive payment history up until trouble hit, mention that. The creditor might be willing to set up a payment plan that keeps the debt off your credit report.

If the creditor has sold the debt to a debt collector, negotiation is more difficult. The original creditor has no incentive to work with you because it’s no longer their debt. In this case, you’ll probably have to simply accept the charge-off and focus on resolving the collection account. 

If you negotiate a payment plan or a settlement, get a commitment from your creditor in writing. Only offer what you can afford to pay. 

Remember that a settlement will appear on your credit report as settled for less than the original amount. That’s not as bad as a charge-off, but it’s still a derogatory entry. 

What if the creditor won’t budge?

You cannot force a creditor to remove a legitimate charge-off from your credit record. It will stay on your credit report for seven years, even if you pay it. 

A creditor that charges off a debt will usually sell the account to a third-party debt collector. If this happens, a new entry will appear on your credit report in a section headed “collections”. The Collections entry is also a derogatory item that will further reduce your credit score. 

If you can pay the debt or negotiate a settlement before the collection agency reports to the credit bureaus, you may be able to avoid having the collection entry placed on your report. 

Dispute the charge-off

Disputing an accurately reported, legitimate charge-off is generally a waste of time. There are, however, some situations where disputing a chargeoff is the right move.

• The debt is not yours.
• The debt was paid.
• More than seven years has passed since the debt first went delinquent.

If a charge-off on your credit report fits any of these descriptions, you can and should dispute it using the credit report dispute process.

It’s important to routinely monitor your credit reports for any negative information that might be inaccurate. If you find errors, start the dispute process immediately.

You can file a dispute with any of the three major credit reporting agencies: Experian, Equifax, and TransUnion. You will send a simple dispute letter identifying yourself and the account number for the item you’re disputing and explaining the nature of your dispute. 

You should be prepared to document your claims.

If one credit bureau determines that your dispute is legitimate they will forward the information to the others. You don’t need to file disputes with all three.

Send a pay-for-delete letter

Creditors don’t like to charge off debts. For them that makes the debt almost a total loss: if they sell the debt to a collection agency they will get only pennies for every dollar of debt.

A pay-for-delete letter offers a deal: you’ll pay all or part of your debt if the creditor agrees to delete the record of your charge-off. There’s no guarantee that the creditor will accept and they aren’t obligated to delete the record, but it’s worth a try.

Keep your letter brief and make sure the offer is clear. (You can find a good template here.) Only offer what you can afford to pay. If the creditor agrees to the arrangement, get a commitment in writing before you make the payment.

Should I get help from a credit repair company?

Credit repair companies like Lexington Law will manage this entire process for you. They will send dispute letters and pay-for-delete letters and negotiate with creditors on your behalf in an effort to get negative items removed. You’ll have to pay them, of course.

If you have only a few derogatory records on your credit report you are probably better off sending these letters yourself: there’s nothing a credit repair company can do that you can’t do on your own for free. You might be better off using your money to pay off debts.

If you have bad credit, with a complicated credit history that includes a large number of derogatory records, retaining a credit repair company might be a worthwhile move. Just be sure you’re clear on what it will cost and you’re convinced that the gain will be worth the cost.

The credit repair business has earned a shady reputation, but there are some legitimate companies. Do your research carefully to be sure that you’re hiring one of the good ones.

Watch out for this “credit repair” tip

Some credit repair companies — not the reputable ones — claim that they can get even legitimate accounts removed from your credit record. They may advise you to dispute every negative record on your credit report, or offer to do it for you (for a fee, of course).

The Fair Credit Reporting Act (FCRA) requires credit bureaus to verify your account within 30 days. Sometimes even a legitimate creditor will fail to verify and the account will be removed. 

That’s especially true of older collection accounts that have passed from one collector to another. That is one case where it could be worth disputing an account that you know is yours. Information may have been lost as the account was passed on.

In most cases, this strategy isn’t worth the effort. Creditors know this routine and they have the information and systems in place to deal with it. You’ll also force creditors to update their records, and that could harm you.

Even if you do succeed in removing an item, it may not be gone forever. Creditors can report a debt for seven years from the date of the first delinquency, and if the account is legitimate it’s likely to reappear.

Should you pay charged-off accounts?

A charge-off does not remove your liability for a debt. You are still legally obligated to pay. 

Once an account is charged off you’ll be dealing with a debt collector sooner or later, and your situation won’t improve. Debt collectors can make your life miserable and you could potentially be looking at a lawsuit and wage garnishment.

A paid charge-off will still appear on your credit account, and it will still affect your credit score. A charge-off settled for less than the original amount will have a greater effect. Either is still much better than having a charge-off plus a collection account.

Paying or settling the account before it goes to collections will be to your advantage.

Do you need help with a charge-off? Check out this video for some tips and tricks:

Pay off debt from other accounts first

Paying a charged-off account will help you, but it may not be your highest priority, especially if the account has already gone to collections. In this case the damage to your credit is already done and your main concern is avoiding legal action.

If you have other past-due accounts that have not yet been charged off, you may wanrt to prioritize payments on those. If (like most of us) you have limited funds to use for debt payments, you want to put them where they’ll do the most good.

It’s important to have a payment strategy. Review your debts and decide which ones to prioritize, based on the interest rates, their delinquency status, and any other factors that matter to you.

If you’re having a hard time organizing and prioritizing your debts, credit counselling may help. 

How to determine if you have charge-offs or collections on your credit report

The first sign of a charge-off on your credit report is likely to be a rapid drop in your credit score. The first sign of a collection account is likely to be a letter or phione call from a collection agency. 

If you’ve seen these signs or you think you might have an account charged off or in collections, the best way to find out is to review your credit reports.

You are entitled to a free credit report every year from each of the three major credit bureaus. Get these directly from the source: annualcreditreport.com. There’s no need to turn to any other paid or free provider.

Check your accounts one by one. Look for the words “charge off”. Collection accounts will appear in a separate section.

Remember that not all creditors report to all three credit bureaus. If an account is charged off it will only appear on the credit report of the bureaus that the creditor reports to. Collection agencies will usually report to all three major credit bureaus.

How does an unpaid charge-off affect your credit score?

FICO is the most popular credit scoring model, and our payment history is the single most important part of your FICO credit score. Lenders want to know how likely you are to make your payments on time, and the last things they want to see on your record are late payments, charge-offs, and collection accounts.

As soon as a payment is reported late, your credit score will drop. If it isn’t paid the 30 days later, your score will drop again. It will drop further with each successive report that doesn’t show the debt paid.

By the time a debt is charged off it has been late for some time — typically six months — and there will already be substantial damage to your credit. The charge-off will hurt your credit more. If the account goes to collections there will be even more damage.

It’s impossible to predict the exact decrease in your credit score that a late payment, charge-off, or collection account will produce. That will depend on what your score was to start with, what other information is in your credit account, and how much information is in your credit report.

You can expect that the decline in your credit score will be significant.

A large hit to your credit score is a real problem. Even if you’re not trying to borrow today, you may be in the future. It may be difficult or impossible to procure new credit like a home loan, auto loan, private student loan or other financing.

Many people with damaged credit resort to high interest payday loans or other predatory loans because they don’t qualoify for fairly priced loans.  

Is a charge-off worse than a collection account?

In some ways a charge-off is worse than a collection account. Once the original creditor sells your account to a collection agency they have no incentive to negotiate with you. At that point it’s almost impossible to remove a charge-off from your credit report unless it’s an error.

At least with a collection account there’s a chance that you can use a pay-for-delete arrangement to get the account removed.

It’s hard to compare charge-offs and collection accounts because they usually go together. If you’re hit with a charge-off a collection account will usually be close behind.

Generally yes. You have less negotiating power to get them removed, and you still technically owe the money.  But all negative accounts hurt your credit score.

What if my debt is overwhelming?

If your debts are simply beyond your capacity to pay, don’t panic and don’t give up. You still have options. You’re in a bad situation but you can get out of it.

Negotiate a payment plan

Remember that creditors don’t want to charge off debts or send them to collections. That’s a complete loss for them. If you give them any hope of collecting they will probably be willing to work with you.

Contact your creditors and offer a payment plan. If you can’t manage the full amount, offer a settlement for less. Be honest and offer only what you can afford to pay. There are no guarantees but there’s a good chance that creditors will be willing to negotiate.

Try a goodwill letter

Many people fall into debt trouble due to circumstances beyond their control, like job loss, illness, or divorce. If you’re in this category, write to your creditors, explain the situation, and ask to negotiate a way to pay.

Many creditors will work with you, especially if you had a good payment record until things went wrong. It will help if you have evidence to prove that your financial problem is not your fault.

Many credit card issuers have hardship programs for cardholders who have experienced adverse life events. These may not be advertised. Ask your card issuer.

Credit counseling/Debt Management Plan

Nonprofit credit counselors are a helpful option for people facing overwhelming debt. Most offer a free initial session, where they will help you organize your debts and review your options.

Many credit counselors offer Debt Management Plans. If you use a Debt Management Plan you will make a single monthly payment to your credit counseling agency. The agency will pay your creditors and try to negotiate better deals.

Completing a Debt Management Plan requires discipline and commitment, but it can be an effective way to break out of a debt trap. Choose your credit counseling agency carefully: not all of them are legitimate!

Debt consolidation

Debt consolidation involves taking out a new loan an d using it to pay off several old ones. This can simplify your payments — you’ll only have to make one payment a month — and you may be able to lower your interest rate.

Debt consolidation can be a challenge if your credit is seriously impaired. You may not be able to get an appropriate loan and if you can the interest rate may be too high to make consolidation an effective strategy.

If you’re looking for a debt consolidation loan and you have credit issues, consider personal loans from Upstart, Avant, or OneMain Financial, all of which will lend to borrowers with less than ideal credit, or peer-to-peer lending patforns like LendingClub or P2P Credit.

Talk to a bankruptcy attorney

If there is no possible way for you to pay your debts, bankruptcy is a viable option. Bankruptcy is not a financial death sentence, it’s a fresh start. 

There are risks and some associated costs, so you will have to consider your options carefully, but many people come out of bankruptcy in better financial condition than they were in when they went in.

Many bankruptcy lawyers offer free initial consultations. They’ll review your situation, help you decide whether bankruptcy is right for you, and explain the process. Another way to look into bankruptcy is through Upsolve, a free app that has been called “TurboTax for bankruptcy”.

The bottom line

If you’ve got a charge-off on your credit report and you think it’s a mistake, it’s important that you take action right away. If it’s legitimate, remember that the debt does not disappear. You’re still obligated to pay it. It’s in your best interest to try to negotiate a lower payment, or contact a credit counselor for advice on your next steps.

FAQs

Will my account be charged-off even if I’m making payments?

Your account can be charged-off even if you are making payments as long as your payments are below the minimum payment on the account. A creditor may also charge-off an account if you file for bankruptcy, even if you have been making payments.

Does a credit card company care about charged-off debts when I apply for a new card?

A credit card issuer wants to know that you will make payments on time. A charge-off indicates that have not paid on-time payments in the past. That will make card issues reluctant to deal with you. A charge off may also lower your credit score beyond the issuer’s minimum level.

What is the statute of limitations on debt?

The statute of limitations varies from state to state. Six years is a common figure but you’ll have to look up the statute of limitations in your state. 
The statute of limitations has no bearing on how long a debt stays on your credit report: that is fixed at seven years from the date of the first delinquency.

How do debt collection agencies acquire debt?

Collection agencies usually buy debts from creditors, often for pennies on the dollar. Once the agency buys a debt the original creditor no longer has any connection to the debt. 
Some creditors may hire a collection agency to collect their accounts and pay them a percentage of the amount collected. In this case your debt is still owed to the original creditor. This is a common arrangement with medical debts.

What are my rights when dealing with debt collectors?

The Fair Debt Collection Practices Act spells out your rights when dealing with debt collectors. Debt collectors cannot threaten you or use foul language. There are limits to how often they can contact you. They must provide information of=n your debt within 5 days of their first contact.
Learn more about your rights here.