What is a chargeoff?

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When you see a chargeoff on your credit history, you may be wondering what that means.  Charge-offs are when a creditor declares they will not likely collect on a debt owed.

Why would a creditor want to charge-off a debt?

A creditor may choose to charge off debt in order to make it a more favorable tax write-off for the individual, business, or government organization.  Alternatively, they will sell the debt to a third-party collection agency.

How does a charge off on my credit history affect my score?

Poorly.  Chargeoffs are one of the worst possible items on a credit report.  It shows that a debt was unpaid for a long period of time and reported as ‘likely never to be repaid’ to the bureaus.  The worst part is, the debt still exists in your name.  Even after a charge-off account is paid back, the chargeoff remains on your history, although labeled as paid-in-full.  Charge offs may also be settled for less than the amount due, these would be labeled ‘settled’ on your credit report.  Although this seems like a positive conclusion, the charge-offs still may be viewed as negative (even if settled or paid in full) for as long as 7 years.

How can credit repair help remove charge-offs from my history?

Credit repair professionals are well-versed in the many variables associated with charge off accounts.  The first place to start is to review and validate.  By ensuring all reporting was done correctly a repair company can be certain that each negative account is having the smallest impact on your score.  In this step you will want to help your company research the following information:

  • The initial agreement between you and the creditor
  • Any transfers of debt ownership to a third-party collection agency
  • Your payment history
  • Current balance of the account
  • Fees and penalties added to the account
  • The collection agency’s bonded right to pursue the debt in your state of residence

All of the above items must be proved in writing by the creditor or collection agency within 30 days or else the account is eligible to be removed from your credit history.

Secondly, the creditor or collection agency may be willing to work with you to settle the debt.  Just be sure to get it in writing.  Work with you credit repair company to work within your legal rights to improve the debt situation.

Lastly, you may want to simply let the debt expire.  Depending on the situation of a particular account, taking action may ‘re-age’ the account and extend the amount of time it will appear on your history.

A good credit repair company will be able to advise you in all of these situations, helping you decide how to approach each negative item on your credit report.  Working with a verified company who has years in the industry will give you the confidence to approach your financial history with optimism.