A charge off is when a consumer is very late on a payment (usually 120 days or more) that the credit company claims the debt as a loss. Usually these accounts come from credit card accounts, medical bills, utility bills, loans, or any type of account that is not paid on time. Many consumers believe that they no longer have to pay a debt once it is charged off, however this is not true. Even if the lenders receive their payments after the charge-off appears on your credit it can stay on your report and affect your credit. Your account may be closed and the lender may opt to use their own collection agency or sell your debt to a third party company that will attempt to collect from you.

How does a charge off affect my credit and credit score?

A charge-off will stay on your credit report for seven years and does not look favorable for you by any means. To a typical lender, if you have one or more charge offs on your credit report there is a good chance they consider you to be an unacceptable risk and not approve you for any type of credit. They do not want to see this because it shows that you never paid the debt, and you may do the same thing with the money you borrow from them.

How can I avoid a charge off in the future?

This is why it is so important to check your credit report to gain knowledge about what is contained in the report. Stats show that 79% of Americans have negative information listed on their credit reports. Even if you do have an accurately reported charge off on your credit report, if you pay it off or start to pay off the monthly balance you can sometimes work out a deal with the creditors so they will change the status on the report or list an explanation that will look better for you. The smartest thing to do is to pay your balance before it goes to a late payment.

How can I improve my credit and credit score after a charge off?

If you have one charge off, or multiple charge offs on your credit report, it is your legal right to dispute the information if it is being reported inaccurately. If the account goes into collections but you have paid the balance, then you should dispute this with the credit reporting bureaus. CreditLawGroup is here to help; we make it simple and easy to dispute any misleading, inaccurate, or unverifiable information on your credit report. Our low cost services are easy to use, and you can log in online and view your process right from home. Click here to learn more about negative information that may appear on your credit report.