What is a Credit Card Charge Off?

What exactly is a charge off? Can you get it removed?  How much does it harm your credit score? Do you need to pay it off? Answers to these questions, and more, are explained below.

What is a Credit Card Charge Off?

Credit card charge-offs occur when a consumer stops making card payments for six months or more. After a credit card account becomes that truant or past due, the card issuer declares that the consumer has a low likelihood of paying off the debt.

What Happens if a Credit Card is Charged Off?

If you have a charged-off account, it will show up on your credit reports and lower your credit score. Having charge-offs on your account can make it extremely difficult to get approved for a mortgage, an auto loan, beginner credit cards or credit cards with low-interest rates, and more.

What Does a Credit Card Charge Off Mean for Your Credit Report?

A charge off will show up on your credit history for up to seven years from the first missed payment. It remains on your account regardless of whether you have paid off the debt or not, unless you make a deal.

How Does a Charge Off End Up on Your Credit Reports?

The creditor reports these to credit bureaus, which in turn note the charge-off in your credit reports. Rather than being listed as an “Account in Good Standing,” your charge off will show on your credit report under “Negative Items” or “Negative Accounts.”

How Bad is a Charge Off on Your Credit Score?

A charge-off affects your score even more because it is a derogatory mark. Higher credit scores are affected more significantly than low credit scores.

When Will a Creditor Report Your Activity to Credit Bureaus?

At the end of each billing cycle, creditors typically report your credit card activity to the three major credit bureaus (Equifax, Experian, and TransUnion). Billing cycles are between 28 to 31 days.

Should I Pay Off Charged Off Accounts?

Whether or not you should pay a charge off account depends on whether the charge off is legitimate or made in error. It’s essential to follow the proper steps in either finding charge-off errors or paying a charge off to ensure it doesn’t continue to show on your credit accounts as bad debt.

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