Checking your credit report is a large part of maintaining your credit health. It might be tempting to avoid reviewing your report, especially if you know you have something that negatively impacts your report such as a charge-off looming. Can you remove a charge from your credit report? A few steps are involved, but you can.
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 there was still a balance owed. 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 make a significant impact on your credit — and not in a positive way. Charge-offs hold a lot of weight on your credit report showing creditors that you have failed to successfully pay back a debt making you appear risky.
Can a charge-off be removed?
Receiving a charge-off does not mean you’re stuck with it forever. There are some cases where 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 and 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.
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.
Review your credit report
Though you likely received a notice about the charge-off in the mail, still 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, in fact, a debt owed and that you are the actual owner. Mistakes happen. If this is not yours, you will need to make a dispute.
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. In addition, consider any further information that will help with any other 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.
Contact the credit bureau
Let’s 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.
Negotiate with the credit bureau
If the charge is accurate, negotiate with the credit bureau to see how you can get the charge-off removed from your report. 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 only sometimes 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 them 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, they typically buy 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.
Consider paying it off
Depending on the amount of the debt, consider paying it off in full. While setting up a payment plan might be more accessible and cost-effective, it can still negatively affect your credit score. While paying it off does not guarantee you will not see a drop in your credit, paying it 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. Here are some approaches to consider.
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 this 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.
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 that you could not do yourself, the convenience of having someone else handle the details might be worth it.
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.
Charge-offs aren’t forever
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. Whatever happens, even if you can’t agree, the charge-off will eventually go away and will not haunt you forever.
Should I pay off a charged-off account?
Yes, if you can pay off the charged-off account, do it. Be sure to check the charge-off is legitimate before paying it off, just in case it is on your report in error.
How can I raise my credit score with a charge-off?
If you have other accounts, keep those in good standing. Pay your other bills on time and stay ahead of them to keep your report in good standing with your other active accounts.
Is a charge-off worse than a collection?
A charge-off means that the creditor has assumed you will not pay the debt, which is better than going to collections.