Charge-off accounts can impact your credit significantly, keeping you from being approved for new credit or causing higher interest rates.
The best way to avoid charge-offs altogether is by paying accounts on time. However, if your creditor has already reported your account as charge off, it may be worthwhile to address the underlying debt and attempt its removal.
Read on to learn the steps you need to take to remove a charge-off from your credit report.
Table of Contents
What is a charge-off?
A charge-off is a declaration that creditors, such as a credit card issuer, make when an account is deemed as uncollectible and is written off from their books as a loss. This process takes place when you fail to make debt payments for an extended period, typically for 180 days or more, meaning that the account is delinquent.
During this period, creditors generally try to collect the outstanding balance. However, if after multiple attempts they’re unsuccessful, the account is charged off and reported to the credit bureaus.
In some instances, the creditor may also sell the account to a third-party debt collection agency, which oftentimes pursues the repayment through legal actions.
How to remove a charge-off from your credit report
Put together the details of the debt
The first step is to gather and confirm all the details of the charge off debt. Reviewing your credit report from all three major credit bureaus — Equifax, Experian and Transunion — is usually a good start. You can get access to your free credit report online at annualcreditreport.com.
Aside from looking for any inaccurate information, check who currently owns the debt and how much it is. If the debt was sold to a collection agency, verify the following information:
- Account number: the account number with the original lender.
- Original creditor name: the company that originally billed you for the debt.
- Opening date: the date your account was first opened with the original creditor.
- Charge-off date: the date your account was deemed uncollectible and charged off.
- Payment history: a record of when you missed payments along with when your account was last active.
- Borrower names: whose name is attached to the debt
Pay special attention to inaccuracies in the dates, the amount owed and the type of debt. For instance, collection agencies may report the date they purchased your delinquent account as the date the account was last active rather than the date the original lender or creditor charged off the account. This practice can actually prolong the time frame during which the debt affects your credit score, as older charge-offs affect your credit less as time passes.
You should also check the unpaid debt balance for additional fees tacked on to the original amount that should not be there. Although you may be responsible for late fees, penalties or interest, it should line up with a stated fee schedule from the original creditor. In essence, there are no bogus fees added to your account balance.
Finally, make sure you recognize the name of the original creditor and the name of the debt is attached to you as well. It’s not uncommon for creditors to mix up people with the same or similar names with one another along with their debt.
Dispute inaccuracies
If you find erroneous information regarding the account, you have the right to dispute the charge-off. Federal law allows you to initiate a dispute with the credit bureaus’ reporting information you believe to be inaccurate.
Be prepared to supply supporting documentation that backs your claim regarding the erroneous charge-off. This might include original invoices, account statements, contracts and any correspondence you might have with the creditor.
Once you submit this information, the credit bureau will investigate your claim. If there is an error, they must correct or remove it in compliance with the Fair Credit Reporting Act. You can also submit a dispute with the furnisher (original creditor), too. In either case, both entities must generally conclude their research and decision about the charge-off account within 30 days.
If the debt is accurate and unpaid, try paying it off
A valid charge-off account that remains on your credit report can result in a bad credit score. A paid charge-off won’t have as much of a negative impact. And some credit scoring models, like VantageScore, don’t penalize a consumer’s score as much for older or paid-off charge-off accounts.
You can pay the full balance all at once or in installments. Another option would be to settle for a lower amount. Paying the account in full looks better on your credit report than settling, but doing something about a charge-off is better than keeping an unpaid charge-off on your credit.
Negotiate a pay-for-delete agreement
If your charge-off debt is accurate and unpaid, try paying it up. A paid charge-off won’t have as much a negative impact on your credit score than an unpaid collection account. Actually, some credit score models, like VantageScore 3.0 and FICO Score 9, ignore all paid collections which can cause your score to increase.
If you can’t pay the full amount upfront, you can try to negotiate a pay-for-delete arrangement with your creditor or debt collector. A pay-for-delete agreement allows you to pay the outstanding debt in exchange for removing the charge-off from your credit.
Some creditors may be willing to accept a debt settlement too, in which you pay a portion of the debt instead of the full balance. However, keep in mind that creditors are under no obligation to agree to a pay-for-delete request. Now, if you successfully negotiate an arrangement, don’t forget to ask for all details in writing.
Get everything in writing
It’s important to get all the payment arrangement terms in writing—the more specific the better.
Once you get the details in writing, verify that everything is accurate. If not, ask for an update based on what you discussed with your creditor.
Additionally, make sure the agreement is on an official company letterhead and that it includes information such as the amount to be paid. It should also clearly state the creditor’s intention to remove the charge-off from your report once you meet their terms.
Hire a credit repair company
If you need help with the process, hiring a credit repair company like Lexington Law or Credit Saint can come in handy.
The best credit repair companies can help you get things done quicker with potentially better results. These professionals can also provide insight into other personal finance strategies that may boost your credit score even more. Some even have legal departments that can help fight your case if necessary.
The key to working with a credit repair company is doing proper vetting. Before choosing, make sure that you’re dealing with a reputable service that uses effective, non-fraudulent ways to remove charge-offs from your credit report.
Check sites like the Better Business Bureau and the Consumer Financial Protection Bureau (CFPB) to research previous customer reviews and whether they’ve engaged in unethical or shady practices around credit repair.
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How to Remove Charge-Offs from Your Credit Report FAQ
How do charge-offs affect your credit?
Charge-off accounts can have a significant negative impact on your credit score. For starters, it will cause a drop in your credit score. Additionally, it can make it difficult to apply for new credit accounts and loans.
How long does a charge-off stay on your credit report?
Like other negative items, a charge-off account can stay on your credit file for up to seven years from the day it was first reported as delinquent. After this period, the charge-off should be automatically removed from your credit report.
Can you remove a charge-off without paying?
If the charge-off account is valid and accurate, there’s very little chance that you’ll get it removed from your credit report without paying. However, if there are inaccuracies or errors, you can initiate a dispute with the credit bureaus so that they correct the information or remove it.
What can you do if you can’t remove the charge-off?
If you haven’t been able to remove a charge-off from your report, focus on minimizing the effect it has on your credit score by making payments on time on all other accounts, keeping your credit utilization low and avoiding opening new accounts. You can also try to negotiate a pay for delete agreement with your creditor. If needed, consider seeking assistance from a credit repair company.
Summary of Money’s guide for removing charge-offs from your credit report
- First, check your credit report and put together the details of the charge-off debt.
- If the debt is inaccurate, dispute it with the credit bureaus.
- If the debt is accurate, attempt paying it off or negotiate a pay-for-delete agreement.
- Make sure to get any payment agreement in writing.
- Hiring a credit repair company can take a lot of the work off your hands, though you will have to pay for the service.
How to Remove Charge-Offs from Your Credit Report FAQ
How do charge-offs affect your credit?
Charge-off accounts can have a significant negative impact on your credit score. For starters, it will cause a drop in your credit score. Additionally, it can make it difficult to apply for new credit accounts and loans.
How long does a charge-off stay on your credit report?
Like other negative items, a charge-off account can stay on your credit file for up to seven years from the day it was first reported as delinquent. After this period, the charge-off should be automatically removed from your credit report.
Can you remove a charge-off without paying?
If the charge-off account is valid and accurate, there’s very little chance that you’ll get it removed from your credit report without paying. However, if there are inaccuracies or errors, you can initiate a dispute with the credit bureaus so that they correct the information or remove it.
What can you do if you can’t remove the charge-off?
If you haven’t been able to remove a charge-off from your report, focus on minimizing the effect it has on your credit score by making payments on time on all other accounts, keeping your credit utilization low and avoiding opening new accounts. You can also try to negotiate a pay for delete agreement with your creditor. If needed, consider seeking assistance from a credit repair company.