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Keeping Score

Should my charged-off card debt be removed from my credit report?

A charge-off stays on your credit report for seven years, and you can’t get it removed before then

Summary

If an unpaid debt was charged off by your credit card issuer, it will stay on your credit report for seven years, and you still have to pay it off. However, if you believe it’s an error, it’s critical to file a dispute with the credit bureaus.

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Dear Keeping Score,

I have a charged off Wells Fargo credit card from 2014. Just recently I noticed Equifax is reporting “Scheduled Payment” for the full balance amount owed. I immediately disputed this incorrect entry, and three days later it updated to show a different amount “Past Due” but the “Balance” is the same and the “Scheduled Payment” is also. Is there a violation of the FCRA here against the data furnisher or Equifax if they don’t correct this or delete this account? —Ashley

Check out all the answers from our credit card experts.

Ask Steve a question.

Dear Ashley,

A lot of people make the same mistake you have. The entry on your credit report is correct and not in violation of the FCRA. In short, when your account charged off, the creditor (in this case Wells Fargo) has determined that you are not going to pay your bill.

However, you still owe the money and the creditor still has the right to try to collect the debt and report that you owe the money along with the amount that is past due (which could theoretically change on a monthly basis), even if they have tacitly acknowledged that they are unlikely to recover the funds from you.

The Fair Credit Reporting Act (FCRA) is a major federal consumer protection law that regulates credit reporting agencies and compels them to ensure the information they gather and distribute is a fair and accurate summary of a consumer’s credit history. The purpose of the law is to protect consumers from having erroneous information used against them.

If you believe or even suspect that inaccurate or out of date information is in your file, you have the right to dispute the data and the consumer reporting agency must examine the disputed information, usually within 30 days. If they can’t verify the information, the consumer reporting agency has to remove it. In the case of a disagreement between you and the agency, you are allowed to add a 100-word statement to your credit file explaining the situation.

See related:  Minimizing score damage after a charge-off

What does ‘charged off’ mean for your credit?

Now that you know the debt is real and the credit bureau is just doing its job, let’s discuss what happens next. You say this account was charged off in 2014. Let’s talk about what “charged off” means to your credit from three different perspectives.

First, from a credit reporting point of view: If the account was charged off five years ago, you still have two years left before this item will drop off your credit report. Most negative items stay on your report for seven years from the last uninterrupted delinquency.

Second, from a debt owed point of view: Let me say it again – a charge off does not mean that you don’t still owe this debt. If Wells Fargo elects to sell your account to a third-party collector, you can expect to be hearing from those folks in the future. Chances are that after five years, you won’t be hearing from a collector until the debt is coming up on a milestone. This may happen just before your debt ages to seven years or when your debt approaches the statute of limitations for your state.

Third, from a credit scoring point of view: when your account charged off your score received major damage. Depending on how much positive information was in your account, the point drop could have been massive. Over the past five years, the damage from the charge off has largely dissipated. In two years, the charge off will disappear from your report and have no further impact on your score.

Lastly, you are correct that you do have the right to have correct information listed and to remove any incorrect information. If you still think the info is wrong, try reporting this again and be very clear about what you want to happen.

Also, be sure to follow the directions Equifax lists for disputing file information:

“If you believe that any of the information found on this report is incorrect, there are three ways to launch an investigation about the information in this report. When you file a dispute, the credit bureau you contact is required to investigate your dispute within 30 days. They will not remove accurate data unless it is outdated or cannot be verified. To initiate a dispute online please visit https://www.ai.equifax.com. To check the status or view the results of your dispute please visit https://www.ai.equifax.com.”

I suggest you check your credit report at the other two agencies, Experian and TransUnion, to see if the same data is showing up there as well. You can get one free credit report from each of the three bureaus each year at AnnualCreditReport.com. If so, you may want to file individual disputes with each of them, too, even though Equifax is supposed to notify the other agencies when they receive a dispute. It doesn’t cost you anything but time to do this and you will know that you have done it right.

See related:  Paid a charged-off debt; now what?

Be careful if you plan to pay back the debt

I would also encourage you to be careful if you are approached about paying this debt. Paying the debt in full will not help your credit score. The damage is done. Making a partial payment may just reset the clock on the statute of limitations. However, it is up to you, should you be willing and able to pay off the debt.

Remember to keep track of your score!

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