How to Remove a Charge Off from Your Credit Report
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If you have bad credit, you’re not alone. Several things can lead to a bad credit score. All it takes is one credit card with a poor payment history to put a dent in your credit report. And if negative items add up, you can find yourself in a sticky situation.
Bad credit history can hurt your chances of being approved for loans and other personal finance products in the future. Fortunately, there’s something you can do about negative information on your credit report. Here’s what you need to know about charge-offs and how to reverse their damages.
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Charge-offs and their effect on your credit report
A charge-off is an outstanding debt that is on your credit report. It’s important to note that a charge-off is not an active account that you’re currently paying off. A debt isn’t considered a charge-off until you’ve stopped paying off the debt for long enough that the creditor considers your account a lost cause. The length of time before a creditor gives up on your account can vary, but it’s typically somewhere between 120 and 180 days after your missed payment. In some cases, a creditor may sell your debt to a debt collection agency at this point. Either way, the creditor reports your delinquency to the 3 major credit bureaus — Equifax, Experian, and TransUnion.
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What does a charge-off do to your credit?
When your account is charged off, it will show up on your credit report. If a debt collector tries to claim money from your delinquent account, that can also show up on your credit report. Even if you do eventually pay off the debt, the charge-off and debt collection attempts can show up on your credit report for up to seven years.
If you don’t pay your debts on time, it can lower your credit score. If your account gets to the point that it is considered a charge-off, your credit score has probably already felt the impact of missed payments. The charge-off will also hurt your credit score once it shows up on your credit report.
These things can come back to haunt you if and when you decide to apply for a new loan or credit card. In most cases, lenders and creditors will look at your credit report and credit score to determine whether they can approve you for your loan or line of credit. It also helps lenders assign the amount that you can borrow and your interest rate.
Ways to remove charge-offs from your credit report
It’s not easy to remove charge-offs from your credit report, but there are some steps that you can take to see if it’s possible. Each situation is a bit different, so it’s important to make sure that you’re taking the steps that are most appropriate for the charge-off you’re trying to remove.
If it’s an error
The Fair Credit Reporting Act mandates that the only accounts that can appear on your credit report are those that are accurate and verifiable. But in some cases, a charge-off could show up on your credit report when it doesn’t belong there. This could happen if the account isn’t yours, or in the case of fraud. It could also happen if your payments were misapplied and not put toward the debt you were intending to pay off.
If you see a charge-off on your credit report and believe that it’s a mistake, you’ll need to dispute the charge-off. To do this, you’ll reach out to the credit reporting agency that you are using to view your credit report. You should also reach out to the creditor that claims to have the delinquent account. During the dispute process, you’ll need to provide evidence to support your dispute. This could include payment receipts or other evidence of identity fraud, depending on the situation at hand.
If the charge-off is accurate
If the charge-off on your credit report does belong to you, you can’t dispute it. The best thing to do is pay off the debt in its entirety if you can, then request to have the charge-off removed from your credit report. However, credit reporting agencies have the right to keep it on your credit report for seven years, so they may not agree to remove it even if you’ve paid off the debt.
The other option is to negotiate with your creditor. You may not be able to get the charge-off completely removed from your credit report, but negotiating may help you reduce its negative impact of it. Here are the steps to take if you decide to begin negotiations with your creditor:
Confirm the current owner of the debt
The first thing that you need to do is figure out who currently owns the debt. Sometimes the original lender of a loan will sell it off to another company at some point. In this case, you’d need to figure out who the loan was sold to and negotiate with them. Similarly, if the original creditor sold your debt to a debt collection agency, you’ll need to negotiate with the agency that now holds your collection account.
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Discuss the details
Once you’ve determined who owns your debt, you can reach out to that company and let them know that you’d like to discuss your account. You’ll want to confirm a few details, such as how old the debt is and what the remaining balance is.
Talk about a debt settlement
Tell the creditor that you want to offer to settle the debt. When you do this, the idea is that you’ll try to settle the debt for less than what you currently owe. As with any negotiation, it’s a good idea to start low and assume that the creditor will negotiate for a higher payment amount.
Both the amount of your debt and the owner of the debt can impact how successful you’ll be with your debt settlement negotiations. The creditor will likely look at your credit report to determine how much they think they can get you to pay off. For example, they may see that you have some available credit and assume that you can use that to pay off your debt with them.
If the debt is relatively small, the creditor will probably want you to pay for it in full rather than negotiating for a lower payment, especially if they see that you have enough available credit. The creditor may also be less lenient than a third-party debt collector might be. This is because debt collection agencies usually purchase debts from creditors for a small percentage of the balance. Even if you negotiate to pay only 50% of your remaining balance, the collection agency will still profit from the payment arrangements.
Finalize the agreement
When you’ve finished negotiating with the creditor, you should make sure that the agreement is in writing. It should say that you don’t owe any more money and that the creditor or debt collection agency will stop trying to collect money from you. You’ll also want to make sure that the creditor will update your account to a zero balance with all three credit reporting agencies.
This doesn’t mean that the charge-off will be completely removed from your report, but it will look better to anyone who is looking at your credit report. To get the charge-off removed completely, you can attempt to negotiate a pay-for-delete agreement. This agreement would make it so that your repayment is contingent on the removal of the charge-off from your credit report. It’s worth a shot, but there’s no guarantee that you’ll be able to get the charge-off removed completely.
Services that may help remove a charge-off
Though there is no guarantee when it comes to removing a legitimate charge-off from your credit report, there are still some places you can turn to for help. Some credit repair companies offer services that can help you remove charge-offs and improve your credit score.
Creditrepair.com
Creditrepair.com offers a 3-step plan to its customers, and it all begins with a free consultation. The company’s plan is to check, challenge and change your credit report. Creditrepair.com communicates with the credit bureaus on your behalf to ensure that the proper changes have been made to your report as it works to repair your credit.
Additionally, Creditrepair.com offers tools that help you keep track of your credit repair process. This includes a personal online dashboard that you can use to monitor your credit score and changes to your credit report. You can also set up text and/or email alerts to be kept informed of what Creditrepair.com is doing for you.
Like other credit repair companies, Creditrepair.com offers its services for a monthly fee. There are a few different packages of services to choose from depending on your needs. Creditrepair.com can help match you with a package after pulling and reviewing your credit reports.
Lexington Law
Lexington Law is one of the top credit repair companies in the nation. If you’re considering using a credit repair agency, you can go to the Lexington Law website and browse the resources to see if credit repair is right for you. The company also offers a free credit consultation. During this consultation, you’ll be able to get advice about which credit repair services — if any — could benefit you.
With Lexington Law, you’ll be able to choose from 3 service levels. Each service level has a monthly fee associated with it. Lexington Law can challenge items on your credit report with the credit bureaus and represent you in creditor interventions in all 3 service levels. They also offer additional services such as a credit score analysis, daily credit monitoring alerts from TransUnion, and coaching.
Sky Blue Credit
Sky Blue Credit offers a single package that includes all of the features that you might need from a credit repair company. You can get a free consultation before signing up for Sky Blue Credit’s services to make sure that you know what you’re getting. Sky Blue’s team of experts can help you identify items on your credit report that you might need to dispute. Then, it can dispute up to 5 items per credit bureau every 35 days,
In addition to filing disputes on your behalf, Sky Blue Credit can help with other credit repair services. This includes statute of limitations research, which can identify which debts collectors no longer have the right to collect on. Other services include customized advice that can help you optimize and improve your FICO credit score.
Sky Blue Credit’s services are available for a monthly fee with a free 6 day period after you sign up. You can also pay an extra fee for add-on services such as debt settlement and negotiation consultations.
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The costs of charge-offs
One of the biggest costs of charge-offs is the damage that it does to your credit report. But there are financial implications to be aware of as well. First of all, if there is a charge-off on your credit report, it means that you have outstanding debt. If the charge-off is accurate, it’s your responsibility to deal with it.
If you can afford to pay off your account, it’s best to do so. Paying off your outstanding debt does not mean that the charged-off account will automatically be removed from your credit report. This may make some people think that it’s not worth paying off the debt if you can. However, a paid charge-off account can make a positive impact on your credit, even if it isn’t fully removed from your credit report.
When an account is paid off, it will be reflected on your credit report. So even if the charge-off is there, your report will reflect the fact that you were able to pay off the debt. This can help raise your credit score because it lowers your total amount of debt. It can also show creditors and lenders that you may want to work with in the future that you took care of the charged-off account. This can help build trust in your ability to repay a loan and ultimately increase your chances of getting approved in the future.
An unpaid charge-off will stay on your credit report as an outstanding debt. Not only that, but the creditor can sue you for repayment of the debt as long as they are within the statute of limitations in your state. This can increase your costs over time in a few different ways. For example, if you apply for a personal loan in the future, consider how the unpaid charge-off will look to the lender you are seeking a loan from. The lender will see that you were unable to or unwilling to pay off the outstanding debt by looking at your credit report and seeing the charge-off. This will probably make the lender feel hesitant about lending you any money, for fear that you may not repay your debt to them. Even if you are approved for the loan, you may be charged a higher interest rate or receive a lower loan amount due to your unpaid charge-off.
When it comes to removing the charge-off from your credit report, there may or may not be costs involved that aren’t related to repaying the debt itself. If you decide to reach out to creditors and the credit bureaus on your own, you shouldn’t incur any additional costs to do so. However, if you hire a credit repair agency, you will have to pay for their services. Most credit repair companies charge monthly fees for their services. Each company sets its own cost, but to give you an idea, Sky Blue Credit charges $79.00 per month.
Pros and cons of handling a charge-off on your credit report
Pros
- By dealing with the charge-off, you may be able to settle with your creditor or the collection agency to pay off a lower amount than the outstanding balance.
- Paying off a charged-off account can help improve your credit score, even if you can’t get it fully removed from your credit report.
- If a charged-off account on your credit report isn’t yours, you should be able to get it entirely removed so it won’t continue to impact your credit score.
Cons
- When an account is charged off, you’ll owe the entire balance of the account. You’ll have to negotiate with the creditor or collection agency if you want to make other payment arrangements.
- Dealing with a charged-off account can be time-consuming because it requires you to do some research and communicate with your creditor or collection agency.
- The alternative to handling the situation yourself is to hire a company to do it for you, which means you’ll be paying that on top of paying off your charged-off account.
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The bottom line
If you have a charge-off on your credit report, it’s important to get to the bottom of it. You can dispute the charged-off account if you don’t think it belongs to you or if you think some of the information is inaccurate. You can also dispute the charged-off account if everything is accurate, but that process is a bit different.
When you despite an accurate charge-off, the best thing to do is try to settle the debt. You may be able to negotiate to pay off a lower amount than the total balance of the charged-off account when you do this. In some cases, you may be able to make an agreement with the creditor that the charge-off is removed from your credit report when you pay it off. However, creditors are not obligated to agree to this condition, and a charge-off can remain on your credit report for up to 7 years.
The good news is that even if you can’t get a charge-off removed from your credit report, you can lessen the impact that it has on your credit. By paying off a charged-off account, you can show other lenders that you are willing and able to pay off your debts. This can help increase your chances of getting approved for new loans or lines of credit in the future.
Charged-off accounts are just one thing that you should be checking for on your credit report. Monitoring your credit reports can help you ensure that your accounts are being accurately reflected. Annualcreditreport.com is a good place to go if you want to pull your credit reports for free.
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Ashley Hart is a lead copywriter and digital marketing expert covering finance, law, real estate, music, entertainment, health and wellness.
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