What is a charge off?
A charge-off or “chargeoff” is the declaration by a creditor (usually a credit card account) that an amount of debt is unlikely to be collected. This occurs when a consumer becomes severely delinquent on a debt. Traditionally, creditors will make this declaration at the point of six months without payment. en.wikipedia.org › wiki › Charge-off
How Does A Charge Off Affect My Credit?
A charge-off is categorized on your credit report as “Derogatory Mark”. Some of the other Derogatory Marks include:
- Civil Judgement
- Late Payments
- Debt Settlement
- Tax Liens
A charged-off account that has a past-due balance is worse than a charged-off account that has been paid or settled. Meanwhile, the balance associated with a collection account is not considered in FICO’s scoring models. … That’s why paying off a collection doesn’t actually result in a higher credit score. www.thesimpledollar.com › whats-the-difference-between-a-charge-off-…
How many points does a charge off drop credit score?
FICO, the most widely used credit scoring system says a charge–off can take up to 150 points off a credit score. The higher your score was to start with, the greater the damage will be. rebuildcreditscores.com › 7-essential-facts-about-charge-off-accounts
Can I get a car loan with a charge off?
A charge–off stays on your credit reports for up to seven years from the date of the first missed payment, and lowers your credit score. If you have a charge–off listed on your reports, you aren’t automatically disqualified from getting a car loan, you just need to find the right dealership. www.autocreditexpress.com › blog › can-you-get-a-car-loan-with-a-cha…
STEP 1. Get A Free Copy of Your Credit Report
Its 2020 and aside from your free annual credit report a majority of us have already heard of creditkarma.com . Well, if you have been living under a rock, here’s a quick run down. They offer your TransUnion and Equifax credit scores with a decent breakdown of the different “weights” that are holding your score back. Sorry, still no Experian. Scores are based on Vantage Score 3.0 model so there is a slight difference from FICO’s model, but still a very accurate depiction.
STEP 2. Comb Through Your Report For Inaccuracies
What are some on the causes for inaccuracies?
- Identity theft
- Divorce (this needs to be an article by itself)
- Poor record keeping (addresses, similar names, relatives with the same name and address ie Jr Sr III)
- Accounting errors( cable/utility termination fee from a properly closed account)
STEP 3. Determine The Age Of The Debt
Take the date of the first missed payment from your credit report and add 7 years to that. That 7 year mark is when it will no longer be on your credit report. That is to say, you still owe the creditor, but they can no longer report it. However they can always sue, so keep that in mind, before you assume all is forgiven.
Note: If you call them or they call you and you agree to make payments or settle the debt, that time clock starts over from the date you made the agreement. Try to avoid shooting yourself in the foot.
STEP 4. Pay for Delete
Getting a collector to delete a charge off can be tricky but if done right, will yeild fast results. In the instance that you are prepared to pay the balance in full, you should try your best to get it in writing that after your payment is accepted, the credit report entry will be deleted. This means calling the creditor and having them send you a letter by mail stating that once your payment is processed the entry will be removed.
Personal Experience: I had wells fargo retail card delinquent and then into a charge-off. it sat on my report for a year. I made an agreement to pay down the balance of $1000. I made several installment payments. my credit score was not improving while I paid it down to about $350. I stopped paying for another 6 months while I was unemployed. I noticed that the date the account went delinquent changed to the day I made the payment arrangements, pushing the 7 year mark even further away. I called and asked for a letter to be sent to my address agreeing to “delete after paid in full”. Once paid it took a little more than 30 days but less than 60 days to drop off my report.
Once you form a game plan that works with your current financial situation. Put it into action with the goal lifting a weight off your shoulders. You can expect that while paying it down, your score will not improve. In the instance it is removed your score will see a decent uptick. Lastly, some businesses in the collection industry are straight up predators, taking advantage of people who are less informed…
DO NOT COMMUNICATE WITH “PORTFOLIO ASSET RECOVERY” AT ALL. CONSULT A PROFESSIONAL BEFOREHAND. YOU HAVE BEEN WARNED
What are your experiences with charge off?
Did you see an improvement once you paid the balance in full, or did your score improve only after it was removed?