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How Long Does A Charge-Off Stay On Your Credit Report?

We’ve all had sticky financial situations where we had only the best intentions to repay a debt, but then life happens. Something caused your financial situation to change and, it got to the point that as hard as you tried, it became more and more challenging to commit to paying a certain bill. Over time, things only got worse, and you found yourself unable to pay the bill.

Despite our best intentions, sometimes life doesn’t go as planned and, our financial stress causes us to have to pivot, regroup, or possibly miss payments. Sometimes lenders even decide that it’s more efficient for them to just accept the fact that this debt will have to get charged-off to the books. Unfortunately for you, that leaves a stain and does not sit well when you try to move forward and build a credit history with other lenders.

So, that bears the question, How Long Does A Charge-Off Stay On Your Credit Report? Let’s break down what a charge-off is, what you can do about it and how long it can affect your credit.

a past due bill on a brown wood table with a cell phone that says "no service".

What is a Charge-Off?

A charge-off is a term used to reflect the fact that a lender attempted to collect a debt from a borrower but was unsuccessful. In essence, the borrower failed to repay the debt, and the lender is no longer trying to collect.

A charge-off reflects negatively on a borrower’s credit report and can cause their credit score to drop, affecting their success in acquiring future credit. A charge-off can be used with different types of debt, like credit cards, mortgages, auto loans, etc.

A lender can only charge off a debt when it reaches a certain level of delinquency, and that varies by the type of debt. For instance, credit card debt can only be charged off after the loan has been delinquent for 180 days; a personal loan can only be charged off after it has been delinquent for 120 days. Debt can also be charged off following death or bankruptcy.

After an account is charged off, the lender can sell it or assign it to a debt collection agency. A collection agency can still attempt to collect the debt even though it was charged off by the original lender. Most of the time, the original lender will then report this loss of repayment of the debt on their taxes.

How Long Does a Charge-Off Stay On Your Credit Report?

A charge-off will stay on your credit report for seven years after the date the account went into delinquent status. Meaning, even though a charge-off may not be reported until six months after the account went delinquent, the first six months prior when it first went delinquent is still counted as part of the seven years. Once a legitimate charge-off is on your credit, it is difficult to get removed (but not impossible).

How to Remove a Charge-Off On Your Credit Report

Removing charge-offs from a credit report is a very difficult thing to do. Especially if it’s a legitimate charge-off. Negative credit information can remain on a credit report for at least seven years, some longer. However, there may be some things you can attempt to get a charge-off removed.

Inaccurate Reporting

If you feel the charge-off on your report is inaccurate, you can dispute the report with the credit bureau that’s reporting the inaccurate information. The credit bureau will investigate your claim and correct it if it’s proven inaccurate. If the inaccurate information or reason you list on your dispute cannot be validated, the credit bureau will delete the charge-off from your credit profile.

Pay for Delete

If the charge-off is accurate, you could try negotiating with the lender or debt collector to update or remove the charge-off from your credit report. That is called pay for delete, and as the name implies, you’re asking for the information to be removed from your report, in exchange for paying towards the charged off amount.

That is a legal request on the borrower’s part. However, though legal, the request doesn’t have to be honored. If the lender or debt collector does agree to honor the request, the borrower will likely have to pay all of the debt, or a good portion of it. The lender may agree to a settlement, which is less than the full amount owed.

Make sure any arrangements agreed upon with the lender or debt collector are stated in writing prior to remitting payment. The initial request should be in writing, and all copies of the correspondence should be kept for future reference.

Credit Repair

Another option when all else fails is to turn to a legitimate credit repair company. They will work on your behalf to get the charge-off or other negative information removed from your credit report. That can be a time-consuming process, as the credit repair company has to investigate your financial situation and attempt to negotiate. They would not be doing anything that you would not be able to do for yourself. However, the fee associated with hiring a credit repair company may be worth the time and hassle they save you when disputing the charge-off.

Life After a Charge-Off

It’s not always possible to get a charge-off removed from a credit report. If that is the case, you will have to live with the charge-off for seven years. As the charge-off ages, its impact on your credit score lessens. The borrower will always be responsible for that debt and any future debt after that.  Here are some things to do in the meantime that may help:

  • Build a positive payment history with all lenders going forward. Payment history accounts for about 35% of a credit score.
  • Limit credit inquiries so they won’t reflect against your account. Too many credit applications can cause a credit score to drop.
  • Pay down debt as much as you can to reduce your credit utilization ratio. You could even get a credit limit increase, with the intention to use it only for emergencies.
  • Continue to dispute any inaccuracies on your credit report to keep your report as accurate as possible going forward.