A charge-off can be defined as a derogatory entry in your credit report that has a negative affects your credit scores and your ability to borrow additional funds.

Creditors typically charge off accounts after 180 days outstanding balance, this changes a report from “Accounts in Good Standing” to “Negative Items.” After 180 days this negative item will then reflect as a charged-off on your credit report.

When a creditor consequently sells your debt to a “collector” or a collection agency the balance due on the original account will be change to zero. The charged-off account will could remain in your credit report for seven years unless you can prove the entry is inaccurate. When you get a charge-off your debt is not forgiven. You are still legally responsible for paying the owed amount. You can make payment arrangements by contacting the creditor. When the account is paid off it may still appear as a derogatory entry on your credit report for seven years as a “Paid Charge Off”.

A 30 day late payment or missed payments hurts your credit scores more than any other single factor. It makes even more damage if it remains unpaid after 60 days, 90 days and up to 180 days, once that time frame reflects it turns to a charge-off, by then your score is likely in rough shape.

The distinction between a charge-off and collection entry, is once a creditor has charged off an account they will sell the debt to a third-party collection agency that takes over efforts to collect what’s owed. When this happens you will have two negative items for the same debt appear on your credit report that will lower your score. The original balance “Charge-off” will have a zero balance, and a new entry now be listed as a “Collections.

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*Individual results may vary. Please call for more details and to discuss your own individual situation.