How to Remove Charge Offs From Your Credit Report
Get expert guidance on how to address and potentially remove charge-offs from your credit report to boost your credit score.
A charge-off occurs when a creditor determines a debt is unlikely to be collected and writes it off as a loss. This typically happens after 120 to 180 days of missed payments. A charge-off on a credit report significantly damages credit scores and can hinder a person’s ability to secure future loans, credit cards, or housing.
Can Charge-Offs Be Removed?
Legitimate charge-offs typically remain on a credit report for seven years from the date of the original delinquency. The debt itself is not forgiven or erased when it is charged off; the consumer remains legally obligated to repay it. While complete removal of an accurate charge-off is rare, managing its impact or achieving removal under specific circumstances is possible. These include disputing inaccuracies, negotiating with the creditor for deletion, or waiting for the reporting period to expire. The goal shifts from outright removal for legitimate entries to minimizing their negative influence.
Disputing Inaccuracies
Disputing inaccuracies on a credit report can address a charge-off that contains errors. Before disputing, gather all necessary information and documentation. Obtain credit reports from Experian, Equifax, and TransUnion, reviewing each for inconsistencies related to the charge-off.
Identify specific inaccuracies, such as an incorrect account balance, an inaccurate date of last activity, a duplicate entry, or an account that does not belong to you. Collect supporting documents like payment receipts, bank statements, correspondence with the original creditor, or a police report if identity theft is suspected.
Submit a formal dispute to the credit bureaus and, if applicable, directly to the original creditor or collection agency. Disputes can be submitted through online portals, by phone, or by mail. When mailing a dispute, use certified mail with a return receipt for proof of delivery.
The dispute letter should identify you, include the account number, state the inaccurate item and reason, and include copies of supporting documentation. Under the Fair Credit Reporting Act, credit bureaus must investigate disputes within 30 days. Upon completion, the credit bureau will notify you of the results. If an error is confirmed, the information must be corrected or removed.
Negotiating with Creditors
Negotiating with the original creditor or the collection agency that currently owns the debt presents another avenue for addressing a charge-off. The initial step involves identifying who currently owns the debt, as charged-off accounts are often sold to third-party collection agencies. Researching the debt amount and understanding the potential for negotiation, such as offering a lump sum payment for a reduced amount, is an important part of the preparatory strategy.
A “pay-for-delete” agreement is a specific type of negotiation where the consumer offers to pay the debt in exchange for the creditor or collection agency agreeing to remove the charge-off from the credit report. While this type of agreement can be highly beneficial for credit, it is important to note that creditors are not legally obligated to agree to a pay-for-delete, and such agreements can be difficult to obtain. Crucially, any pay-for-delete agreement should be secured in writing before any payment is made, detailing the terms of the payment and the explicit commitment to delete the entry from credit reports.
Initiating contact with the creditor or collector is best done in writing, such as via a formal letter, rather than solely through phone calls, to create a clear record of communication. The letter should include the consumer’s contact information, account details, and the proposed settlement terms. It is advisable to maintain a professional tone throughout the negotiation process.
If an agreement is reached, especially for a pay-for-delete, ensuring that all terms are formalized in a written document on the company’s letterhead, including the specific credit bureaus from which the entry will be removed, is paramount before submitting payment. Should a creditor or collection agency fail to uphold their end of a written pay-for-delete agreement after payment, the consumer can then leverage the written agreement as evidence in a formal dispute with the credit bureaus.
Impact of Payment and Time
Paying off a charge-off, even without a specific pay-for-delete agreement, influences its status on a credit report. When a charged-off debt is paid, its status on the credit report typically changes from “charged-off” to “paid charge-off” or “settled.” This change does not remove the charge-off from the report, but it signals to prospective lenders that the debt has been addressed. Lenders generally view a paid charge-off more favorably than an unpaid one, indicating a borrower’s commitment to resolving financial obligations. This updated status can contribute to an improvement in credit scores over time, even with the item remaining on the report.
Beyond payment, the natural passage of time also impacts how a charge-off appears on a credit report. After this seven-year period expires, the charge-off should automatically fall off the credit report. Consumers are encouraged to regularly monitor their credit reports as the seven-year mark approaches to ensure that the removal occurs as expected, helping to clear their credit history of this negative entry.