A charge off is a creditor's formal declaration that a delinquent account is unlikely to be paid. This declaration is often made on accounts that are six months past due. When charge offs are sent to the three main credit reporting bureaus, they can have a significant impact on consumer credit scores and purchasing power. Following is everything you need to know about charge offs and their impact on your financial profile.

How A Charge Off Can Affect Your Consumer Credit Score

Thirty-five percent of a consumer's credit score is determined by his or her payment history. Every late payment will invariably have a negative effect on individual credit ratings. Although charge offs can have a significant impact on a person's overall credit score, the greatest damage will have been caused by the late payments that have preceded the charge off.

How Long Does A Charge Off Stay On Credit Report?

A charge off can remain on your credit report for up to seven years. This, however, depends upon the statute of limitations for uncollected debts in your area. In some states, a charge off might only be present on your report for just three to four yeas.

It is important to note that you can alter the status of a charged off account. For instance, if you decide to pay the related debt in full, this report entry will be changed from "charged off" to "charged off:paid".This shows companies that you have made every effort to resolve your delinquent accounts. Moreover, it may make it easier for you to get financing in the future. Simply paying down a charged off debt, however, will not automatically result in these entries being removed.

Are Consumers Responsible For Paying Charge Offs?

Charge offs that are recorded on consumer credit reports are commonly misunderstood. Many people mistakenly assume that they are no longer responsible for paying these accounts given that they have already been written off by the respective creditors. In reality, however, this simply isn't the case. A charge off only means that a creditor has removed the account from its balance sheet given that it is highly unlikely that a payment will be collected.

Typically, once an account is more than six months overdue, it can no longer be carried on the books as a current asset. Although this debt is no longer on the creditor's book, it is still due until the full amount has been paid. It is important for consumers to understand that a charge off is little more than an accounting entry. It is in no way a release from the related debt.

How To Remove Charge Offs From Your Credit Report

There are several ways that you can have a charge off removed from your credit report. The first of these is to negotiate directly with the creditor. You can enter into a formal payment arrangement with this company in exchange for having the negative entry deleted You must be prepared to make a payment at the time that an agreement has been reached.

It is also important to make sure that account information has been recorded accurately on your credit report. If a company sells your delinquent account to a collection agency, the original entry should be deleted so that the same debt is not reported twice.

The client experience depicted on this website is 100% factual, documented, and verifiable.Only the first name of the person depicted above has been changed to protect her identity.The average result of a Lexington Law client is 10.2 removals by month 4 across three credit bureau reports.We serve as an advertising agency for a third party. We are compensated when visitors take certain actions such as signing up for paid services.