A charge-off is something that can have a very high negative impact on your credit scores. A creditor typically charges off a debt that they believe to be uncollectable and they typically do so to get some type of tax exemption. Federal regulations require creditors to charge-off revolving accounts after becoming 180 days delinquent and installment accounts are required to be charged off after 120 days of delinquency.
A charge-off does not make that debt invalid and it can still be collected. The creditor may or may not choose to sell the debt to a collection company as well which should result in the original account showing up as a 0 balance. Many consumers have complained of problems of errors on their credit reports in these cases that have significantly impacted their scores. This is something we can help consumers with to achieve an accurate credit report. Most consumers don’t realize that paying off a charge-off typically does not immediately positively impact your credit scores, although it may over time the fact that it is now paid does not change the fact that it went into a charge-off status.
The credit scoring model calculate risk and although it is very frustrating to many consumers paying off that debt will not typically help them significantly in regards to their credit scores. If the account is sold to a collection company, then you no longer owe the balance to the original creditor, but you now owe the collection agency. Therefore, paying off the debt to the original creditor would not change the status of that account on your credit report. If you were to pay the account once it is in collection then it is much the same as paying the charge-off where it would show as a “paid” collection, but due to it still being a collection would typically not have much of a positive impact on your credit scores. The same goes for if you were to settle a charge-off or a collection it would not result in much of an increase in your credit score if at all. In addition, once the statute of limitations runs out on that debt in the debtor’s state the creditor can no longer sue the debtor of behalf of that debt. However, this does not prevent it from appearing on your credit report.
Over the years we have seen many credit report errors concerning charged off accounts. If you have a charged off account you believe to be inaccurate or potentially harming your credit score and you would like to review it for any errors you are encouraged to call us for a free expert credit analysis at 1-888-799-7267