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How To Remove Charge-Offs From Your Credit Report
By Susan Doktor MONEY RESEARCH COLLECTIVE
Has a creditor recently charged off one of your credit accounts? Perhaps you went through a financial rough patch, or mistakenly thought autopay was set up when it wasn’t. No matter what happened, you don’t want it weighing down your credit scores. So what can you do? Here’s a quick guide on how to remove charge-offs from your credit reports and improve your creditworthiness.
Table of contents:
- What is a charge-off?
- How do you get a charge-off removed from your credit report?
- How do charge-offs affect your credit?
- How to remove charge-offs from credit report FAQs
What is a charge-off?
When a creditor writes off a past due credit account as a loss, it’s known as a charge-off. In short, it means they’ve given up on collecting the outstanding balance from the account holder. However, if you’re the account holder, that doesn’t mean you’re off the hook. You still legally owe the amount even though the account is closed.
A creditor typically charges off an account after four to six months of missed payments, according to Equifax. However, they can also do so if on-time payments don’t meet the required minimum payment amount. So if, for example, you can’t make your minimum credit card payments for five months straight but pay what you can, your credit card issuer could very well close and charge off your account.
Note: One perk that comes with a charge-off is that no additional late fees or interest charges can accrue on the account. Since interest rates and fees on delinquent accounts can be punitive, this is a real benefit.
After accounts are charged off, creditors often sell the outstanding debts to third-party collection agencies. If that happens to your account, your original account balance will drop to zero, and a new account will be established. Unfortunately, both accounts can appear on your credit report as negative items, further hurting your score. Additionally, if you don’t pay off the account, you’ll likely start receiving calls and letters from the debt collection agency.
How do you get a charge-off removed from your credit report?
A charge-off will typically be visible on your credit reports for seven years. However, there are a few ways to have it removed early.
Early removals by debt owners
First, you can turn to the owner of your debt. Creditors and collection agencies have the power to remove negative information like late payments and charge-offs from credit reports. But when will they do so? Here are two approaches you can try:
- Request a goodwill adjustment: You can write a goodwill letter to your debt owner explaining your situation and asking them to remove the charge-off from your report. If you’re lucky, they’ll say yes. You may be more likely to get an affirmative answer if you have a longstanding relationship with the original lender and/or continue to have other accounts with them.
- Propose a pay-for-delete agreement: You can also attempt to negotiate a pay-for-delete agreement. This route involves paying a certain amount to have the charge-off removed.
Both of these options are legal and can be worth a try. However, keep in mind that creditors are under no obligation to make any changes for you.
If you’d like help from someone who has experience negotiating collection accounts, consider hiring a credit repair company. That said, be sure to perform your due diligence when choosing one. You shouldn’t have to pay anything upfront. Further, no one can 100% guarantee they’ll be able to remove an item from your credit report so they shouldn’t be making that claim.
Credit disputes
Next, if you don’t think you should have a charge-off on your account in the first place, you can file a credit dispute. The Fair Credit Reporting Act (FCRA) gives you the right to file free disputes with the credit bureaus any time you find errors on your reports. You may need to do this if your charge-off is, for example, the result of identity theft or incorrect late payment reporting.
So how do you go about it? You’ll need to write a dispute letter explaining your situation. Additionally, you’ll need to provide the account number for the charge-off, documents that support your claim, and more. If you’re not sure where to start, the Consumer Financial Protection Bureau (CFPB) provides a free template for the dispute letter and more details on what to include.
After filing, the credit bureau has 30 days to investigate your case and provide you with a response. If they find your claim to be legitimate, they’ll contact the business that reported the information. The business must then investigate the claim and report back to the credit bureau. If the charge-off is found to be invalid, the business will be required to advise all three credit bureaus (Experian, Equifax, and TransUnion) to remove it from your reports.
How do charge-offs affect your credit?
Payment history is the most important factor in both Vantage Scores and FICO scores, so each payment you miss will cause your credit score to drop. If you miss enough payments to have an account charged off, you’re likely going to fall into the bad credit category for a while.
On the bright side, your credit will begin to recover as time passes — and you can speed up the process if you learn how to build credit fast. In the meantime, you can help to instill confidence in potential lenders (and whoever else checks your credit) by paying off the outstanding balance on your charged-off account. It won’t increase your credit score but will show that you’ve fulfilled your obligation.
Summary of our guide to removing a charge-off from your credit report
- A charge-off is a delinquent credit account that a creditor writes off as a loss.
- Delinquent balances from credit accounts such as personal loans, credit cards, auto loans, and more can all be charged off.
- You are still legally responsible for paying a debt if it gets charged off.
- Charge-offs are often sold to third-party debt collectors.
- Charge-offs and the late payments that cause them will cause significant damage to your credit score.
- Charge-offs will be removed from your credit report after seven years.
- You can dispute a charge-off if you believe it’s inaccurate.
- In some cases, creditors and collection agencies may agree to remove your charge-off early.
- As time passes, your credit score will gradually recover from the charge-off.
