If you’ve seen your credit score drop because of a charge-off, you may be wondering if there’s anything you can do to remove charge-offs from your credit report. A charge-off does serious harm to your credit score and signals to future lenders that you might be a risky borrower.
You don’t necessarily have to live with the negative consequences of having one of your debts charged off.
Before we start, let’s be clear about one thing. There is no guaranteed way to remove a legitimate, verifiable charge-off from your credit report. The credit bureau and the creditor are not required to remove valid information. These steps are still worth a try!
What is a Charge Off?
Before we jump into how to remove a charge-off from your credit report, let’s go over what exactly a charge-off is.
A charge-off occurs when a lender decides that you probably won’t pay back the money that you owe, and sells your debt to a collection agency. This way the lender makes a few bucks off your debt. This is known as a charge-off.
Lenders will generally charge off your debt when you haven’t made payments for six consecutive months. But don’t be confused, you’re not off the hook for the debt. Even if it’s been charged off, you still owe the money and you’ll hear from the debt collector who purchased your debt.
From the creditor’s perspective, a charge-off means that the debt is uncollectible and is written off as a loss. From your perspective, it means major damage to your credit score. A charge-off is one of the most damaging things you can do to your credit.
How Long Does a Charge-Off Stay On Your Credit Report?
A chargeoff is a big deal and can seriously affect your credit score. This happens for a couple of reasons:
- You’ll see your credit score drop even before a charge-off because you’ve missed debt payments. As your balances become past due or delinquent, that is reflected in your credit score.
- When the creditor decides to charge off your debt and reports that to credit bureaus, you will see your credit score decrease again.
A charge-off on your credit report could affect your chances of borrowing money in the future. Negative information, such as charge-offs, will generally stay on your credit report for seven years.
Steps to Remove a Charge-Off
If you’re facing a charge off and you want to get it removed from your credit report, you’ll want to follow these steps:
Step 1: Obtain Copies of Your Credit Reports
You’re entitled to get a free credit report from each of the three big credit reporting agencies every 12 months. If you are lucky enough to live in the state of Georgia you can get 2 copies per year. You can get your free credit reports from AnnualCreditReport.com. If you’ve already requested your free copy and you want another copy within 12 months, you can be charged up to $12.50.
You may also want to check your credit score, which is different than your credit report. Your credit score takes the information on your credit report and applies a numeric score depicting your credit worthiness. A higher number means you have better credit and a lower number means you have worse credit. If you want to check your credit score, you can buy your FICO credit score using MyFico.com.
Read your credit reports carefully and note all late payments, charge-offs, and other accounts that could harm your credit.
Step 2: Prevention
A charge-off doesn’t happen overnight: before an account is charged off it will be delinquent for some time. If you know you have delinquent accounts, don’t wait for them to be charged off.
Be proactive. Contact your lenders at once, explain your situation, and ask to work out a payment plan. You may be able to avoid damage to your credit.
Remember, your lenders don’t want to charge off your account. They only lose money if that happens. If you run away, they have no choice. Face the situation head on and they will usually work with you to find a solution.
Step 2: Look for Mistakes
If it’s too late for prevention, your next step is to check each entry carefully. Look at all of your information and confirm everything is correct, including:
- Each of your debt balances is only listed once.
- All of the accounts listed are actually yours.
- All negatively reported accounts have the correct date of last payment or date of first delinquency.
- That all of the outstanding debt balances are correct.
- That none of the debt is past the statute of limitations for your state.
If one of your accounts has gone into collection, you may find an error with that debt amount being listed multiple times with multiple creditors.
Step 3: Dispute Inaccuracies
If you find any mistakes on your credit report, you’ll want to dispute this directly with the credit reporting agency. You should send a letter to each of the credit reporting agencies that includes:
- Your contact information.
- The mistake information, including the account number.
- Why you believe the mistake is wrong.
- Request for the mistake to be corrected or removed.
You’ll want to send this letter via certified mail with a return receipt so you can have proof that your letter was actually received. You’ll also want to send a letter disputing the mistake to the furnisher, that is, the company that sent the information to the credit reporting bureau.
Quick tip: You can always ask the credit bureau to verify any record. This may result in deletion if the account is not verifiable.
Step 4: Has the Account Been Sent to Collections?
When a creditor charges off an account they typically sell the account to a collection agency. They may not do this right away. If the account is in collections, this will be reflected on your credit report.
If the account has not yet been sent to collections, contact the creditor at once. Explain that you’d like to negotiate a settlement or payment plan and ask them not to send the account to collections.
Follow up with a goodwill letter. If you successfully negotiate a payment plan, ask the creditor if they will put your account back in good standing and remove the entry on your credit report.
If the account has been sold to a collector, you will not be able to remove the charge-off. The original creditor that reported the charge-off no longer owns the account and has no reason to deal with you.
You may still be able to remove the collection account. Start by disputing the account with the credit bureau. Collection agencies may not have full information on their accounts, and if they are unable to provide adequate verification the account may be removed.
If that doesn’t work, try a pay-for-delete letter, offering to settle the account for less than the full amount if the collection agency removes its record of the account.
Collection agencies buy debt for an average of four cents for every dollar of debt, so they can accept much less than the full amount and still turn a profit.
Balance Them Out
This is not a strategy for completely removing charge-offs. If the record is legitimate and the creditor isn’t willing to help, you won’t be able to do that. Despite what some self-styled (and usually self-interested) credit gurus may tell you, there’s no magic trick that makes negative records disappear.
You may not be able to remove those records, but you can remove their influence, which is just as good. There are three parts to this process.
- Time. Negative records don’t vanish from your report for seven years. That’s a long time to wait. Credit scoring models prioritize more recent information, though, and as time passes those old records will have less and less impact on your credit score.
- Positive records. Adding new positive records to your credit file will help you outbalance those old negative records. Check this advice on rebuilding damaged credit.
- Avoid more damage. The first rule of rebuilding credit is “do no harm”. If you have active credit accounts, make payments on time and keep your credit utilization low!
You don’t need to wait seven years for a better credit score. Even if you have done serious damage to your credit, you can rebuild it with effort and knowledge.
You Don’t Have to Do It Alone
Dealing with credit bureaus and creditors can be intimidating. It seems like there are dozens of different terms and letters and account types to master, and the load can be overwhelming. There are options.
If you’d like to fix your credit yourself but you’re not sure where to start, try our DIY Credit Repair Kit. You’ll do the work, but the kit will walk you through the process, provide letter templates, and explain what you’re doing and why.
If your credit report is deeply damaged and you have a multitude of problematic accounts, you may want to engage a professional credit repair company to help you clean up the mess. We encourage you to check out Credit Saint. With industry-best reviews, great rates, and a free consultation, they’re our #1 recommended credit repair company.