What Does Written Off Mean on a Credit Report?

When a debt is marked as “written off” on a credit report, it signifies that the original creditor has ceased internal collection efforts and declared the debt an uncollectible loss for accounting purposes. This action, often referred to as a “charge-off,” does not eliminate the borrower’s legal obligation to repay the debt.

Understanding “Written Off” Debts

A “written off” debt, also known as a “charge-off,” represents a debt that a creditor has deemed unlikely to be repaid. This is primarily an accounting term, where the lender removes the amount from their active accounts receivable ledger and records it as a loss.

Creditors typically write off a debt after a significant period of delinquency, usually ranging from 120 to 180 days of missed payments. Once written off, the original creditor may sell the debt to a third-party collection agency for a fraction of its value, or engage a collector to pursue payment on their behalf.

Credit Report and Score Impact

A written-off debt appears on a consumer’s credit report as a “charge-off,” serving as a severe negative mark. This derogatory entry significantly impacts credit scores, potentially causing a drop of 100 points or more, as payment history is a major factor in credit scoring models. The presence of a charge-off signals to potential lenders a history of failed payment obligations.

The negative impact extends to a consumer’s ability to obtain new credit, such as loans, credit cards, or mortgages. It can also influence other areas, including rental applications, utility service approvals, and insurance rates, as these entities often review credit reports. Even if the debt is eventually paid, the charge-off entry will remain on the credit report, noted as “paid,” still reflecting the initial delinquency.

Managing a Written-Off Debt

A written-off debt typically remains on a credit report for up to seven years from the date of the original delinquency. This period is mandated by the Fair Credit Reporting Act (FCRA), ensuring that negative information eventually ages off the report. Consumers should regularly monitor their credit reports to confirm the accuracy of such entries and their removal after the statutory period.

Individuals dealing with a written-off debt have several options. They can choose to pay the debt in full, which will update the status on their credit report to “paid charge-off” and may be viewed more favorably by future creditors. Another option is to negotiate a settlement with the original creditor or the collection agency for a lesser amount than the full balance owed. It is also important to dispute any inaccuracies on the credit report related to the written-off debt with the credit bureaus.