About Charge Offs
Despite how it sounds, a charge off does not mean your debt has been charged off or removed. It won't be erased from your credit report. There is an amount of time for which such a debt will linger before it expires and will no longer affect your credit score. A charge off occurs when a creditor decides that it's time to write off your account and close it.
Despite the fact that the account has been closed, you do still owe that money. It is likely that the debt will be sent to the company's collection department or given to an outside collection agency who will attempt to collect at least a portion of the debt from you.
Once your debt is sent to a collections agency, it still remains your responsibility. Your original contract is still in effect. The holder of the contract has simply changed hands and now belongs to the collections agency. Therefore, any payment or payment arrangements you make should be with this agency, not your original debt holder.
It is common practice for collection companies to offer you a one-time lowered settlement or other payment arrangements. Be sure to get the terms in writing. Sometimes these payment arrangements are to be accepted as payment in full; however, the collections agency may fail to reflect that on your credit report. Your report may say that your debt is partially paid, while your agreement with collections was that partial payment would completely settle the original debt. Always check your credit report to ensure that payment has been reflected.
This is why it's important to get any agreement in writing. You should be able to use that written agreement to resolve any dispute. It is important to realize that your agreement may still have some negative impact on your credit report since it will indicate the final payment was less than the initial amount owed and may register your late payments. This is still preferable to not paying the charged off debt at all.
About Credit Reports
Charge offs will remain on your credit report for seven years from the date that you first became delinquent. You should know, however, that if your charged off account goes into collections, you will receive a second negative entry on your report representing the collection. That collection will stay on your credit report for seven years from the date it was reported delinquent. The mark of having a collection will not be removed for that seven-year period even if you pay the debt off or make arrangements to settle with the collection agency.
About Credit Score Recovery
You may be interested to know that there are ways to rebuild your credit score after a charge off. Making arrangements and settling the debt is a start. Do everything in your power to make on-time payments on any other credit accounts you hold and be patient. As time goes by and you maintain your good credit habits, the impact of any charge offs will begin to lessen on your credit report. In time, you can regain a positive credit score.
While a charge off is not desired, it isn't the end of the world. Making arrangements to pay or settle the debt is the best route you can take in these matters, as ignoring the debt will have a far greater negative effect on your overall credit score.