Checking your credit report can help you maintain your credit health. It might be tempting to avoid reviewing your report, especially if you know a negative event like a charge-off is looming. Can you remove a charge from your credit report? It’s possible but involves a few steps. Keep reading to see how you can get personalized offers from our trusted partners through MoneyLion!
What does a charge-off mean on a credit report?
A charge-off on a credit report means that the guarantor wrote your account off as a loss while a balance remained on the account. Having an account charged off takes time to happen. Depending on the creditor, it can take a payment anywhere from 120 to 180 days late before it’s assumed it will be unpaid. Charge-offs can significantly hurt your credit score. Charge-offs hold a lot of weight on your credit report. They show creditors that the consumer did not successfully pay back a debt. This increases the creditor’s level of risk for working with this consumer.
Can a charge-off be removed?
Receiving a charge-off does not mean you’re stuck with it forever. In some cases, you can remove it from your credit report. Depending on who is in charge of the account now will determine your approach to tackling the charge-off. For example, you might have to go through either your initial creditor or a debt settlement company. You can attempt to negotiate payment options and get the charge-off removed. The process might take some leg work, and you could hear a “No” on getting the debt settled and removed. But if it works out, it will benefit your credit.
How long does a charge-off stay on your credit report?
You can remove negative items from your credit report early, including charge-offs, if you negotiate and repay debt. If neither of those options is feasible, a charge-off will stay on your credit report for up to seven years from the date of the first missed or late payment. Creditors and debt collection agencies can file lawsuits and request repayment even if a charge-off is no longer on your credit report.
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”Steps to removing a charge-off from your credit report
Having a charge-off can be scary, but here are the steps to take in hopes of getting it removed.
1. Review your credit report
Though you likely received a notice about the charge-off in the mail, confirm the charge-off on your credit report. Get the details about the debt, including the amount, debtor, and age of the debt. Confirm that it is a debt owed and that you are the actual owner. Mistakes happen. If this is not yours, you will need to dispute it.
2. Gather relevant information about the charge-off
Once you have confirmed that the dispute is legitimate, you will need additional details. For example, you need to have the account number if the debt is with a debt settlement company and the dates of the charge. Also consider information that will help with further clarification, such as any payments you made toward the amount and the date of the last payment. It also might be helpful to have any communications from the creditor before the charge-off.
3. Contact the credit bureau
Say the charge is an error, and you must file a dispute. First, contact the credit bureau directly. All three credit bureaus — TransUnion, Experian, and Equifax — offer online, phone, and by-mail disputes. You must complete a dispute form for the credit bureau and copies of proof that the charge is incorrect. As a best practice, keep records of everything you send and anyone you speak with to ensure that you have the correct information and proof of any arrangements.
4. Negotiate with the creditor
If the charge is accurate, negotiate with your creditor to see how you can get the charge-off removed from your report. While you can use this strategy with charge-offs, it is also applicable for other negative items, such as repossessions.
If the debt is still with your original creditor, you can work directly with them and ask for the charge-off to be removed in exchange for a fully paid-off debt. While this is not guaranteed to work, it is worth a try to get the debt cleared. There is a chance that once you are notified of the charge-off, your debt has already been sent to a collections agency. If this is the case, you will need to contact the collections agency directly to manage the debt.
Having your debt with a collections agency could work in your favor. When a debt is sent to an agency, it typically buys it for less than the original amount, which means you can negotiate to pay less than your actual amount owed. While there may be some back and forth with the terms, start low, work your way up when it comes to negotiations, and don’t give up.
5. Consider paying it off
Depending on the amount of the debt, consider paying it off in full. While paying it off does not guarantee your credit score will immediately recover, paying debt off before seven years still looks better and could have less impact.
How to negotiate with credit bureaus
Negotiating with a credit bureau may seem intimidating, but it can get easier once you start the process. Here are some approaches to consider.
1. Consider a pay-for-delete agreement
This common method of negotiating debt involves sending a letter directly to your original creditor or the collections agency. In the letter, you ask the lender to agree to remove a charge-off in exchange for a payment. You can ask to either pay it off in full or partially. This method is beneficial for new debt settlements and smaller debts. While the company is not obligated to say yes to this agreement, this method is useful and can yield success.
2. Work with a credit counseling agency
You can hire a credit counseling agency to help you with your credit, including removing charge-offs. There is a fee involved with using a credit counseling agency, and you want to confirm the agency’s validity before agreeing to work with it.
Credit counseling agencies can be helpful because they handle everything for you. For example, they contact the creditor or the collection agency and find out all the details of the accounts needed to get your credit in order. While credit agencies are not doing anything you could not do yourself, the convenience of having someone else handle the details might be worth it.
3. Get everything in writing
Whichever option you choose, make sure you get everything in writing. For example, when speaking with credit bureaus or collection agencies, if you come up with an arrangement over the phone, ensure they send a letter confirming the plan before you make payments. If they agree to any negotiation methods, make sure the letter includes how much you are expected to pay and the agreement to remove the charge-off once the payment is made.
What happens if you don’t pay a charge-off?
If you don’t pay a charge-off, it will stick around. It will remain on your credit report as an outstanding debt that can impact your ability to get approvals for things like loans, credit cards, and housing. Like most negative marks on your credit report, it will eventually fall off your account after seven years. Still, your credit score will likely have taken a significant hit by this time.
How to rebuild your credit after charge-offs
A charge-off will hurt your credit score, but you can take several actions to recover and get your score back in good condition. These strategies can lead to a higher credit score over time.
Establish a positive credit history
A positive credit history comes from making your payments on time. Even if you have a charge-off, you can demonstrate a good credit history by staying on top of your remaining payments. Making on-time payments for your credit card, auto loan, mortgage, and other financial products can go a long way in repairing credit.
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Make timely payments
Timely payments are a critical component of any high FICO score. Payment history makes up 35% of your credit score and is a key factor lenders review before handing out loans.
Keep a low credit utilization
You can start with the minimum payment on credit cards, but it’s better to pay off as much as you can. Paying off more of your debt reduces your credit utilization ratio. This ratio measures the percentage of your credit limit that you have borrowed against. If you have a $10,000 credit limit and have borrowed $1,000 against that limit, you have a 10% credit utilization ratio. A 30% utilization ratio can improve your score, but it is ideal to get this number below 10%.
Monitor credit reports regularly
Your credit report gives you insights into your current credit score and items that are impacting your score. Monitoring your credit report regularly can help you stay on top of your score and detect suspicious activities. Credit reports can reveal whether you are a victim of identity theft and help you take action sooner. Tracking your credit can keep you safe and result in a higher score.
Recovering from a charge-off
Finding out you have a charge-off on your account can feel challenging, but it doesn’t have to last forever. Once you decide you can pay the account off, start negotiating with your creditor. Get a plan that works for you but is also agreeable to the company you owe, and get it in writing. If that feels too hard to tackle, consider hiring a credit repair agency to help. You can continue to improve your credit score with on-time payments and a low credit utilization ratio while working on the charge-off.
FAQ
Should I pay off a charge-off in full or settle for a lower amount?
It is typically better for your credit if you can pay off a charge-off in full.
How long does it take to remove a charge-off from my credit report?
It can take up to seven years to remove a charge-off from your credit report. Negotiating with the creditor and repaying the debt can speed up the process.
Can I remove multiple charge-offs from my credit report at once?
You could try to remove multiple charge-offs from your credit report at once if you negotiate with creditors, or the collections agency if applicable, and repay them.
