When you are building a good credit score, one of the worst things that could happen to you is getting a credit report chargeoff on your account.
What makes it so bad is that it’s hard to remove a credit report chargeoff from your credit report.
As you know, one of the most important factors affecting your credit score is your payment history.
But even worse than missed payments is a ‘charged off’ loan.
While negative information like a “hard inquiry” can stay on your credit file for up to 2 years, a charge-off can remain on your credit file for up to 7 years, even after you pay back the loan.
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For this reason, it is important to know how to remove credit report charge-offs from your credit file. And to do that, we’ll be looking at;
- What is a credit report chargeoff?
- How do I get credit report chargeoffs?
- How to remove a credit report chargeoff?
- How to remove credit report chargeoffs by negotiating a settlement?
- What if my credit report chargeoff is an error?
- Rebuilding Your Credit Score after a credit report chargeoff.
What Is a Credit Report Chargeoff?
A credit report chargeoff is a loan that the creditor has written off because they don’t think you will pay.
The creditor records the loan as a loss because they think they can’t get you to pay any longer.
Creditors record delinquent loans as charge-offs after 120 – 180 days have passed since you stopped making payments on the loan.
The creditor may assign the loan to a “Collections Agency” which then pursues other means to get you to pay back, some of which include;
- Written requests to get you to payback
- Phone call requests to payback
- Suing you to court.
Now, while a credit report chargeoff typically means that the creditor has written off the debt, you still have a duty to pay the loan, especially if you want to remove credit report charge-offs from your account.
Failing to remove a credit report chargeoff from your credit file will reduce your credit score significantly.
New lenders want to know that you can pay back the loan and they do that by looking at your credit reports.
While they don’t like to see any charge-offs, they prefer individuals that have paid back “charged-off” debts in full, to customers with unpaid charge-offs and many of those lenders would ask that you remove credit report charge-offs by paying back the debt before they consider you for a loan.
How Do I Get Credit Report Chargeoffs?
When you miss your first payment on a loan, the loan goes into delinquency.
At this stage, your credit score is already being affected. If you continue to miss payments for up to 120 -180 days, then the creditor will write off the debt as “charged off”.
They don’t expect you to make any further payments on the loan and, thus, they record the loan as a loss.
The creditor usually hands over charged-off accounts to a debt collection agency and the account would show up as an “account in collections” on your credit file.
The debt-collection agency then takes up the obligation of making you pay the debt.
The credit report chargeoff then shows up in your credit file and will remain there for about seven years except you can get the creditor to remove credit report charge-offs from your account by negotiating a “pay to delete” with the creditor or the debt collection agency.
The other way you might get charge-offs on your account is if an error was made in your credit file.
In that case, contact your creditor and the credit bureau and ask them to remove credit report charge-offs from your account.
How Do I Remove A Credit Report Chargeoff?
If you aim to maintain a solid credit score, then it is necessary for you to remove credit report charge-offs from your credit files.
While it can be tricky, it is still possible for you to remove credit report charge-offs. The major ways include;
- Pay the Debt in full; If you have accrued legitimate credit report charge-offs in your credit files, then the creditor isn’t obligated to remove credit report charge-offs from your account, even when you’ve paid back the debt in full.
However, you can negotiate a debt settlement with the creditor where you pay the full amount.
You can negotiate a pay-to-delete with the creditor, where the creditor will remove credit report charge-offs from your credit file after you’ve paid the debt, but you have to pay in full on most occasions.
Please remember that the creditor doesn’t have to remove credit report charge-offs from your report even after you’ve paid the debt, so you have to be careful when negotiating.
- Pay a lesser amount; Sometimes, you might negotiate a kind of debt settlement with the creditor, where you pay a lesser amount of the debt.
In this kind of settlement, it is unlikely that the creditor will remove credit report charge-offs from your file, rather, the charge-off status will be changed to “Paid”.
In a case where a debt collection agency now owns the debt, they are likely to accept a settlement that is less than the original amount borrowed, because debt collection agencies usually buy debts for a lesser price.
In such cases, the status of the charge-off would be changed to “Settled”.
Although this method won’t remove credit report charge-offs from your file, it is better for your credit score to have the debt paid.
- Try a “Credit repair” agency; Another option is to contact a legitimate credit repair agency that will try to get the creditor to remove credit report charge-offs and other negative information from your credit reports.
While this option might work, the chances that the credit repair agency will get the creditor to remove credit report charge-offs from your credit report is slim and might not be worth the time and money that you’ll pay the credit repair agency.
Also, be careful of “fraudulent” credit repair agencies that ask for significant sums of money at the onset while promising to remove credit report charge-offs from your financial report.
How Do I Remove Credit Report Chargeoffs by Negotiating a Debt-settlement?
While it is unlikely to remove credit report charge-offs from your account immediately, you can lessen the damage of charge-offs by negotiating a settlement with either the creditor or a debt collection agency.
Here are a few steps to remove credit report charge-offs from your credit file by negotiating a debt settlement with your creditor;
- Find out the present owner of the debt; The first step is to find the present owner of the debt, as only the present owner of the debt can remove credit report charge-offs from the account.
That could still be the original lender or a debt collection agency that has now purchased the debt.
Finding out the present owner of the debt is pretty straightforward.
- Collect all the details about the debt; Collect all the information about the debt, including the age of the debt, the amount, your name, etc.
- Make the “settlement” offer; Make an offer of how much you’ll pay to the creditor.
While it might be difficult to remove credit report charge-offs from your account, paying the debt in full will increase the chance that you’ll remove the credit report charge-offs from your account.
Depending on the amount you owe, the creditor might ask you to pay the debt in full, or at least half of the money.
- Ask for a “pay-for-delete”; You can arrange for a pay-for-delete agreement with the creditor.
A pay-for-delete arrangement means that the creditor would remove credit report charge-offs from your account when you pay back the debt.
The chances of getting a successful pay-for-delete are quite low, but it can be a good way to remove credit report charge-offs from your account.
- Put the agreement in writing; you must record all negotiations on paper.
And the paper should specify all details about the agreement like how much you paid and that you owe no more money.
- Settle the collections agency; Sometimes, the creditor might sell your account to a collections agency and then you’d have to settle the collections agency directly.
In such cases, you would have to contact the agency and demand proof that the agency owns the account.
After they have proved it, then you can make the payment.
When the payment is complete, the account status would be changed to “Paid Collection”.
While it might be difficult to remove credit report charge-offs from your credit file entirely, paying and settling the debt would go a long way in helping your already declining credit score
What If My Credit Report Chargeoff Is Wrong?
Sometimes, the credit reporting agency or the creditor might make errors when collecting your credit information and you might end up with an erroneous credit card charge-off on your account.
Sometimes, you might end up with incorrect information on your credit report because of identity theft.
In such cases, here are a few steps you can take to remove a credit report chargeoff from your credit report.
- Contact the credit bureau in writing immediately and start a formal “dispute” notice.
The notice should contain as much information as possible, including your identity, the wrong information, and why the information is wrong.
- Show them proof of the error and ask them to remove the credit report chargeoff from your account
Rebuilding Your Credit Score After a Credit Report Chargeoff
While you may not be able to obliterate a credit report chargeoff from your credit report until after 7 years, here are a few steps you can take to rebuild your credit score;
- Make on-time payments; One of the best things you can do to rebuild your credit, especially after failing to remove credit report charge-offs from your account, is to always make on-time payments.
- Make bill payments twice per month; This is another useful trick for boosting credit scores.
Making bill payments twice per month will reduce your credit utilization rate, which in turn boosts your credit score rating.
Setting up payment reminders will make this step easier and reduce the time it will take to remove credit report charge-offs from your account.
- Reduce the amount of credit you’re applying for; If you could not remove credit report charge-offs from your report, then the charge-off will remain on your credit report for 7 years.
Applying for a lot of credit in a short amount of time will cause getting hard enquiries on your credit file, and the more negative information you have on your credit file, the lower your credit score.
So even if you can’t remove credit report charge-offs from your file, you can limit the number of hard enquiries on your credit report by reducing the number of loans you are applying for.
- Clear all other overdue payments; After failing to remove credit report charge-offs from your credit file, it would be dangerous to your credit score to keep overdue payments in your credit report.
- Apply for credit limit increase; You must remove It is well known that lenders prefer individuals with a credit utilization rate of below 15%.
And applying for credit limit increases can be a wonderful way to help your credit score by lowering your credit utilization rate, especially if you could not remove credit report charge-offs from your account.
Unfortunately, a “charge-off” stays on your reports for up to 7 years, and a creditor isn’t legally obliged to remove credit report charge-offs from your report.
While it may be quite difficult to remove credit report charge-offs from your file, it is not impossible, and sometimes, you might negotiate a successful “Pay-to-delete” with a creditor or debt-collection agency where they’ll remove credit report charge-offs from your file upon payment of the debt.
Even when you’re unable to remove credit report charge-offs from your credit report, there are still some steps you can take to lessen the damage of the “charge-off” on your credit score.
Learn more about our DIY credit repair program today.