“Charge-off” is an accounting term used when a creditor removes from their list of assets the amount they expect to receive from a debtor. For accounting purposes, the debt is considered uncollectible. But most creditors will still make attempts to collect the debt, or turn it over to a collection agency. These attempts often continue for years.
Charge-offs hurt your credit
A charge-off damages a credit report. It is generally impossible to get real-estate financing (purchase a home) until the credit card charge-off accounts are paid-in-full, or settled-in-full. Even then, the fact that the account was charged-off in the first place can make it more difficult to obtain credit. This fact stays on the credit report for seven years.
Charge-offs go to collection agencies
When a creditor charges-off a debt, they will often assign it to a collection agency. Collection agencies usually put more pressure on debtors to pay a debt. Just having a collection agency involved puts more bad marks on a credit report, and they are harder to negotiate with than the original creditor in most cases.
What to do to avoid charge-offs
The silver lining
A few good things come with having a debt charge-off.
Disclaimer: Debt Shield, Inc. does not provide legal, tax or investment advice. Debt Shield, Inc. does not assist in the repair, modification, improvement, extension or correction of credit entries or reporting.
Copyright 2004 by Debt Shield, Inc. All rights reserved. No publishing, broadcasting, rewriting or redistributing.