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Credit Repair Drill

Credit Repair Drill

Putting your credit pieces back together

Charge Offs – How they affect your credit

Understanding the effects of debt charge off on your credit

A debt charges off occurs when the original creditor gives up on ever being repaid according to the original terms of the loan. This usually occurs at 180 days past due, but in some cases earlier than 180 days.

A charge-off does not mean that you no longer owe the debt. It means the creditor can no longer count it as an asset for tax purposes. If the collector or creditor chooses to charge off your account, this does not cancel the debt or even stop the interest from accruing. You're still responsible for paying back the debt.

Unpaid charge-offs, settlements, and paid charge-offs can have a lasting impact on your credit report. Paying off a charged off account does not remove it from your credit report. The charge off account will remain on your report for 7 years from the original delinquency date. When you payoff the charge off, the creditor will simply update the account payment status to reflect "paid charge-off" but the 7 year credit report will still apply.

To some lenders however, a paid charge-off is better than an unpaid charge-off, and this might work in your favor when obtaining new credit.

Scenario One:

You have Charge Off on your credit report and want to pay it.
Do you have a Charge-Off?
Do you want to pay the charge-off?


1. Request the lender/creditor to report the account to the Credit reporting agency (CRA) as "Paid Charge-Off" or "Settled as Charge-Off" if you pay in full or after a settlement respectively.
2. A paid or settled charge-off is definitely better than having an unpaid charge-off on your credit report.

Before paying off a Charged Off account it's important to make sure the right person is receiving the payment. First check with the creditor to see if the account has been sold or the debt transferred to a collection agency. If the account has been written off or charged off, and the debt sold to a collection agency, then you no longer owe the balance to the original creditor. Instead, the collection agency becomes the legal owner of the debt and all payments and negotiations will now be with the collection agency. Once paid in full, the entry for the collection account will be updated to "Paid Collection."

Tip: Simply paying a charged off account will not remove the information from your credit report. However, If you decide to pay a charge off account, you should try to get a written agreement from the creditor or debt collector to delete the negative information. Most creditors or debt collectors will refuse to remove the information, but it never hurts to ask.

You do not want to pay off a Charge off

Scenario Two:

You have Charge-Off on your credit report but don't want to pay it.
Do you have a Charge-Off?
Do you want to pay the charge-off?


1. The Charge-Off will remain on your credit report for 7 years and 180 days from the date the first non-payment (under the FCRA) after which it will be removed automatically.
2. If it's not erased after the period, then you have to negotiate with the Credit reporting agency/creditor and request them to have it removed from your credit report.
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How long negative information stays on your Credit Report

Charged off accounts: 7 years

Late payments: 7 years

Collection accounts: 7 years

Civil judgments: 7 years

Chapter 13 bankruptcy: 7 years

Chapter 7 bankruptcy: 10 years

Inquires: 2 years
Tip of the day!