Compare Mortgage Quotes

Refinance Rates for Today

Please enable JavaScript for the best experience.

In the mean time, check out our refinance rates!

Company Loan Type APR Est. Pmt.

Credit Charge-off - What is it and how to remove it?

Author: Jessica Bennet
Community Mentor
Ask Jessica
Posted on: 24th Nov, 2005 12:39pm
When you're unable to pay off a debt, the creditor may issue a credit charge off. A charge off doesn't mean that the debt is cancelled or forgiven. It's not that you no longer owe the debt. Credit charge off implies that the unpaid debt will be reported as the creditor's loss when he uses accounting methods for tax purposes.

The creditor may feel that he cannot collect the debt from you; he may write off the account as a bad debt. But he doesn't lose the right to collect the debt. And, even if the creditor does not try to collect an unsecured debt (like credit card, personal loan, etc), he may sell it off to a collection agency (CA), which will then set off to collect the debt.

How to remove charge off from credit report

Usually credit charge off occurs when payments aren't made for more than 6 months. And, it does have a negative impact on your credit report as it stays on the report for 7 years and 180 days from the date of first non-payment of debt. So, what you need to do is, negotiate with the collection agency and try to remove the charge-off from your credit report.

If the creditor has charged off your loan recently, then request him to pull back the debt from the collection agency. Explain that you wish to deal with the creditor directly. Once the debt is pulled back, you can negotiate with creditor to settle the debt for as much as you can pay. You should also negotiate a pay for delete agreement such that even though you don't pay mortgage balance in full, the lender would communicate with the bureaus and have all information on the account removed from your report. If the creditor doesn't want a pay for delete agreement, then request him to update your account status as "Paid charge off".

However if you try to settle the debt by making a partial payment, then the creditor may report it as "Settled Charge off". A "Paid" or "Settled" charge off on a mortgage debt helps to remove the lien from the house title.

SOL and credit charge off

As long as the SOL (Statute of Limitations) period exists, the creditor/collection agency can file a lawsuit against you and try to retrieve the unpaid debt, even after charge off. But after the SOL period (4 to 6 years, varies from state to state) expires, there'll be no lawsuit against you but the creditor or collection agency still has the right to collect from you. However, if debtors make a written promise to pay off the debt or make partial payment after the SOL expires, then in many states, the SOL starts over again.

If you have a charge off on your credit report and wish to get a mortgage, the lender would expect you to pay it off and then go for the mortgage. This is because a mortgage charge off implies there is still a lien existing against the title and the lien can only be removed once it is paid off.
Posted on: 24th Nov, 2005 12:39 pm
Can I get some information on Charge Offs?
Hi Lawson,

Your debt is charged off when the creditor write off the account as a bad debt, but this does not indicate that you are no longer responsible for the debt.

Posted on: 24th Nov, 2005 12:55 pm
Hi Lawson,

Usually you will find the credit card companies using these charge offs. Your debt is charged off when there is a long delay in your payments and the company writes the debt off in their record as uncollectible and stop devoting time and lawyer's fee in collecting it.

It is considered as serious negative mark in your credit report and is almost as bad as bankruptcy.

Even if the company doesn't try to collect the debt further from you but you still owe the money to the company and can be collected if it is sold to an attorney or collection agency.

Hope this information will be useful.

God bless you.

For MortgageFit,
Posted on: 24th Nov, 2005 01:19 pm
Posted on: 24th Nov, 2005 02:21 pm
Hi all,

Thanks for the all those informations and suggestions. I have got a fair idea now.

Thanks again,
Posted on: 24th Nov, 2005 02:41 pm
Hi Lawson,

I also wanted to add that if your chargeoffs are recent then I would say yes to paying them off. But if they are 2 years older or more, I would not advise paying them off. If you are attempting to get a mortgage then sub-prime lenders would not consider these chargeoffs. If however you are wanting to get a conventional loan, VA loan then you would have to pay off the collection accounts. They will not allow you to have any collections, part of their guidlines.
I would suggest that you get onto a credit monitoring program. These are a minimal cost and it allows you to monitor your credit as often as you like. It also let's you know when changes are made to your credit. The 2 that I like are from or privacy guard.

Good Luck to you
Posted on: 30th Nov, 2005 07:25 am
how long does a charge off efect your credit rating and if you pay off the debit does it immediately fix the credit rating
Posted on: 12th Feb, 2006 02:05 pm
A charge off stays on your credit report for 7 years. If you payoff the charge off it does not fix the credit rating immediately but it does help. If you are in the market for a home and the charge off is two years old or older on your credit report then most lenders/brokers would overlook this and not have it count against you. One way that it might affect you is if the lender/broker would want you to payoff the chargeoff because with it your DTI (Debt To Income) ratio might be too high. Sometimes this can be included in the mortgage loan therefor not costing you any out of pocket exspenses.

hope this helps you??
Posted on: 12th Feb, 2006 05:47 pm
Posted on: 01st Jun, 2006 09:46 am

Yes they can still collect money from you. A charge off doesn't free you from the debt.

Actually the a loan is charged off by the lender to adjust his accounts when he feels that he can't collect the debt from you any more and he thinks it as a lost case.

I most cases these loans are sold to different collection agencies by the lender.

Can you tell me why you think they had given a charge off to your loan?

Posted on: 01st Jun, 2006 10:05 am
I saw it in my credit bureau report,as a charge-off,,it was a creditcard for only 400.00 now this debt collectors want 1,000.00,,i am willing to settle with 900.00,,they will not move on it,I don't think they should be allowed to sell your accounts,some collection agencies I heard are forceful and bold.I always thought charge-off would mean your bad risk and it would remain on credit report for so many years.
Thanks for helping me out on this question :cry:
Posted on: 02nd Jun, 2006 05:31 pm
Hi Me,

Don't get disheartened. Try to negotiate again with the collection agency. You are correct that they often disturb you and you feel helpless.

You can check with any debt consolidation company for negotiation purpose but I am not insisting on it as the amount I feel is much lower and I am not sure whether that will worth paying a counselor.

But you can give a try and there is no harm in it. Otherwise if things are settling by paying $100 more then go for it and get your head free from the anxiety.
Posted on: 02nd Jun, 2006 05:47 pm
I would give the extra 100.00 just to get them off my back,it's a shame till they do settle i have to worry about my bank account and if the will have a sheriff's sale on my stuff,i am so upset everyday worrying over what is going to happen,they changed the bankrupstsy law,they need to change this too! you should not be harrased like they do,should be a law and limit to what they can do,I'm not a young person,senior citizen and this worry is to much,Thanks again
Posted on: 04th Jun, 2006 01:51 pm

I can understand your sentiments. It truly becomes harassment to many consumers when they are contacted by a collection agency for a debt which was charged-off long ago.

But till now things are like such and my advice to you would be to pay them off and get everything cleared now. At least you are not going to have tensions any more.

While you get everything paid off check that you get them mentioned in papers and there should not be loop hole left to trouble you again.
Posted on: 05th Jun, 2006 10:10 am
i co-signed a loan for a car and the person i co-signed for had the car repossed and i was contacted by the loan company and have a letter that states if i paid my share of the loan, the part of the loan that i was responsible for would be considered paid in full,,now another company has taken of the original loan and is looking for the balance from me,,am i still responsible for the remainder of the loan.
Posted on: 05th Sep, 2006 12:00 pm

I think the loan company meant that you would be making payment as a charge off amount, but that does not mean you would or the other co-signer will not be responsible for the debt.

The other company may be the collection agency is asking you for the balance amount as you are the co-signer and as the other person is not meeting his payment obligation, they are asking the balance from you. They have the legal rights to ask the balance from you as you are the co-signer for the loan.

Posted on: 05th Sep, 2006 12:24 pm
Page loaded in 0.117 seconds.