What are Charge Offs and How Can They Be Fixed?

Creditors use the term charge off to write off debt. After a period of time where no payment has been made on an account, (usually 180 days), creditors write it off as a loss and send the account to a collection agency.

After the account has been sent to a collection agency, the creditor usually stops charging interest. The reason for this is that they would have to report the account as income on their income taxes, if they stop charging interest they can just write it off.

Charge offs on your credit report are extremely damaging. It affects all aspects of your credit score. You may find it difficult to get another credit card and your interest rates on any current loans you have may go up. (Yes. Even if it has nothing to do with the charge off. The interest rates have everything to do with your credit score)

The first thing to do if you find yourself in a situation of financial stress is to try to avoid having a charge off put on your credit in the first place. Try contacting the lender and explaining your current situation. Negotiate. By making minimal payments as frequently as you are able, you can probably avoid a charge off.

If it is impossible to keep up on monthly payments and you do end up with a charge off on your credit report, there are ways to have them removed. You can try to contact the original creditor and see if you can agree upon a payment plan. They may remove the charge off once the original debt has been paid. Also, it may benefit you to ask questions, creditors are willing to work with you on ways to get your situation resolved. If that doesn’t work you can dispute the charge off with the credit bureaus. When you dispute an item on your credit report, the credit bureaus then have 30 days to verify account with the original creditor. If there isn’t any verification the item must be removed from your credit. Chances are if you have already paid the charge off it will be removed, it may be a little bit harder to remove if there is still outstanding debt. But again, creditors want their money and they are willing to negotiate.

Hard financial times don’t have to ruin your credit score forever. You can use your negotiating skills to repair your credit score and help to keep your interest rates down.

Learn more about how to remove a charge off and other negative items from your credit reports at the credit repair forum.

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