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How to remove a charge-off from your credit report

Your credit report will typically indicate a charge-off for seven years from the date of the original delinquency

Summary

A charge-off typically stays on your credit report for seven years. However, your creditor may in some cases be willing to remove it or update its status if you pay back the debt.

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If you find yourself strapped to pay your bills, particularly in today’s economic climate, you might default on your debt.

If this goes on for a few months, your creditor might well decide that it is better to write off the amount you owe and deem it a loss for its tax purposes.

This is called a charge-off, and it typically happens from about four to six months after you stop making your payments. It could happen even if you have been making less than the minimum payment you owe.

A charge-off doesn’t absolve you of responsibility for the debt, though. And you will still owe interest on it. The lender could turn over your account to an internal collections department to follow up with you. Or it could hire a debt collector to do the job or even sell the debt off to a debt collector for less than the amount you owe.

That way, the lender can at least recoup some of its loss. You could find that the debt collector has taken legal action against you if the debt is still within your state’s statute of limitations laws that determine the time limit for a collector to legally pursue collection on debt.

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Reporting a charge-off

Considering that a charge-off is a loan that a lender essentially considers you to have defaulted on, there are credit consequences. Your credit score will take a hit for up to seven years from the date of the original delinquency.

Under the Fair Credit Reporting Act, a lender that starts the collection process and reports this to a credit reporting agency must also report the original date of the delinquency that led to the charge-off within 90 days. If a debt collector is reporting to a credit reporting agency about a creditor’s accounts, it should report the date of delinquency that the creditor provided.

The original date of delinquency is an important date, since the debt will be reported on your credit report, with likely consequences for your credit score, for seven years following that date of delinquency. Negative input tends to have less of an impact on your credit score as time passes, though.

See related: How long does it take to improve your credit?

See if you can negotiate a settlement

You could take action to make a bad situation better. See if you can talk to the original creditor, or debt collector in case the original creditor has sold the debt, and negotiate a settled payoff of the debt.

If you reach a settlement, your credit report might show the account as “settled,” but it won’t be automatically removed from the report. It is up to the discretion of a creditor to ask to remove a notation on your credit report. It may well decide to take no action if it provides an accurate record of your transaction. (And there may be tax consequences if your debt is forgiven.)

Bruce McClary, vice president of communications at the National Foundation for Credit Counseling, advises that you could offer “something extra to incentivize a favorable response.”

For one, you could offer a settlement of the debt for less than the full balance and negotiate to see if the creditor will remove the account from your credit report. You could even see if the lender will accede to your request without your offering a settlement, and then offer a settlement if it turns down your initial request.

A creditor would be more willing to consider a request without a settlement in case of smaller balances, for which the costs to collect would be greater than the amounts that might be recovered.

“Despite the current economic conditions, the outcome of your request may well depend on how long it has been since the account was paid and how much remains to be paid,” McClary said. “Old accounts that have been especially difficult to collect could be most likely to settle.”

Don’t forget to get written notice of whatever terms you are able to negotiate with the creditor.

See related: 8 things you must know about credit card debt

‘Paid in full’ better than unpaid charge-offs

In case there is anything inaccurate about the reporting, you could dispute it with the creditor or ask the credit bureaus to investigate.

Paying a balance on a charge-off will be helpful to your credit score over time. Lenders tend to view charge-offs that have been “paid in full” more favorably than those that have not been paid.

Also, some credit scoring models, such as FICO 9, don’t count paid off collection accounts in their score calculations, so it is in your interest to pay off the delinquency, Jeffrey Arevalo, financial wellness expert at GreenPath Financial Wellness, advises.

Asking for help during pandemic won’t hurt your credit

And considering the fallout from the pandemic, Arevalo says, “If you seek assistance (forbearance, for example) because of a COVID-19 hardship, data reported to credit bureaus by a lender will not cause a person’s credit scores to go down.

“If you are current at the time you ask for help, they will continue to report you as current during your hardship. The CARES Act requires lenders to report to credit bureaus that consumers are current on their loans if consumers have sought relief from their lenders due to the pandemic.”

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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