How To Remove Charge-Offs From Your Credit Report
It is possible to negotiate a 'pay-for-delete' arrangement with the creditor.
Your credit score is important for buying a home, getting a car loan in your name, or just opening a credit card account. A significant part of your score is based on how you manage payments for loans, credit cards, and other types of credit. Having an account fall delinquent could lead to a charge-off, a declaration by a creditor that a debt is unlikely to be collected, which can cost you major credit score points.
Negative information, including charge-offs, can remain on your credit history for up to seven years. But it may be possible to remove a charge-off from your credit sooner than that so you can begin rebuilding your credit score.
Key Takeaways
What Is a Charge-Off?
When a creditor gives you a loan or line of credit, it assumes you're going to pay back what you borrow. If you fall behind or stop making payments altogether, your account can become delinquent. Once an account has been delinquent for an extended period of time—typically 120 to 180 days—the creditor may charge it off.
A charge-off means your account is written off as a loss. At this point, the account may be assigned or sold to a debt collection agency. The debt collector can then take action against you to try to get you to pay what's owed. That can include calling you to ask for a payment, sending written requests for payment, or even suing you in civil court to try and obtain a judgment.
When a Collection Agency Steps In
Charge-offs don't end your obligation to repay the debt.
Even if your original creditor no longer owns the account, you'll still owe the debt to the collection agency that acquired it. Charge-offs and other negatives in your account history, such as late or missed payments, can stay on your credit reports for up to seven years.
FAST FACT
A charge-off could show up on just one or all three of your credit reports, depending on which credit bureaus a debt collector or creditor reports to.
How To Remove a Charge-Off From Your Credit Report
Removing charge-offs or other negative information from your credit reports can be tricky. Technically, negative credit information that's accurate can legally remain on your credit reports for seven years, and some types of negative information can stay even longer.
That being said, there are some remedies for dealing with charge-offs. Here are the steps you can take if you find yourself with a charge-off on your credit report:
1. Determine the details of the debt
The first thing you need to do is gather all the information about the charge-off debt. That includes how much is owed, how old the debt is, and who currently owns it. Sometimes debts get sold by the original lender and passed on to a collection agency.
2. Inaccuracies? Dispute them
If after checking the details of your debt you find something that’s inaccurate, you may be able to get the debt wiped. Federal law allows you to initiate a dispute with the credit bureau that's reporting information you believe to be inaccurate. The credit bureau then has to investigate your claim and if there is an error, correct it or remove it.
Important: All three credit bureaus allow you to file disputes online, which may be the fastest way to get credit errors addressed.
3. Negotiate with the creditor
If the charged-off account belongs to you and all the information being reported about it is accurate, you could try negotiating with the creditor or debt collector to update or remove the charge-off account from your credit file. Don’t worry if you don’t have the full balance. If an account has been delinquent for some time, the creditor may be willing to accept a settlement in which you pay less than the full amount. Moreover, if the debt has been passed on to another entity, it was probably purchased at a discount.
The option you want to pursue here is called "pay for delete," which essentially involves asking for the account to be removed from your credit reports in exchange for a fee. Pay for delete arrangements are legal under the Fair Credit Reporting Act, but there are a few things to know. First, creditors aren't obligated to honor your request and remove charge-offs from your credit. So while you can ask for a pay-for-delete, there's no guarantee that a creditor or debt collector will agree to it. Second, if they do agree, they might demand that you pay the account in full.
4. Hire a credit repair company
Another option is to work with a legitimate credit repair company to try to get charge-offs or other negative information removed from your credit file. While this can save you time, there's typically a fee involved, and, in most cases, the credit repair company can't do anything for you that you couldn't do by yourself.
Worse, some credit repair companies are just thinly disguised scams whose only goal is to defraud people who need credit help. Be wary of any credit repair or debt relief company that asks for money upfront or promises results that seem too good to be true.
When Removing a Charge-Off Isn't Possible
If you've tried to negotiate with a creditor for the removal of a charge-off but hit a dead end, your only option may be to simply wait it out until the seven-year mark passes. Once that period is up, the charge-off will fall off your credit report naturally and no longer be included in your credit score calculations.
This doesn't mean that you can ignore the debt altogether. You're still legally obligated to pay it. At some point, however, the statute of limitations on the debt may expire. When that occurs, debt collectors can no longer sue you to recover the money. The statute of limitations for different types of debt varies from state to state.
How to Rebuild Your Credit Rating
As long as the charged-off account shows up on your credit report, it will continue to impair your credit score. But the good news is that as charge-offs and other negative information ages, its overall impact can lessen.
In the meantime, you can work on rebuilding a positive credit history by doing things like paying your bills on time, keeping your credit utilization ratio low, and limiting how often you apply for new credit.
Warning: Be careful to avoid accidentally restarting the clock on the statute of limitations for debt. Making a promise over the phone to repay the debt, for example, can reset the timeline in which a creditor can try to collect on it.
Can Charge-Offs be Removed?
Yes, it is possible to get charge-offs removed. This can potentially be achieved by paying the creditor a settlement to delete the charge-off or alternatively by finding an inaccuracy in the details of the debt and raising it with the credit bureau that reported it.
Does Removing a Charge-Off Improve Credit Scores?
Settling the debt and getting the charge-off removed won’t necessarily result in your credit score automatically becoming great overnight. Unless it can be proved that the charge-off was a mistake, it will leave a mark for some time, which can be eased by paying all your other accounts on time and handling your debt responsibly.
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Do Charge-Offs Go Away After 7 Years?
Yes. Most negative information, including foreclosures and charge-off accounts, remains on credit reports for seven years from the date of the first missed payment. After this period passes, the information should automatically disappear.
The Bottom Line
Charge-offs aren’t pleasant. Having one on your credit report can mean being turned down for credit or borrowing money on very uncompetitive terms. If you find yourself in this situation, don’t bury your head in the sand. There’s a chance you can get it cleared—or at least limit the damage and increase the prospects of being in creditors' good books again.
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