Charge Offs Don't Need to Hurt Your Credit Score

The term "charge off" is often misunderstood. When charge offs are filed against a person their initial response may be to assume that the debt is forgiven. This is not true. A person is still responsible to pay the debt, but this signifies that you have been extremely delinquent on your payments. Understanding the situation may help you know how to respond if this happens.

There are different kinds of marks that can be left on a credit record. A charge off is one of the worst, along with bankruptcy and foreclosure, and it can be left on your record for up to seven years. This red flag means that a credit company has been unsuccessful in collecting payment. It will become a major hindrance in getting any another credit line, including a car loan, mortgage or almost any kind of new credit.

A charge off may lead to another red flag: a report that the account is in collection status. Once a creditor has given up trying to collect on an account, it will usually be sent to a collection agency. This third party will then be responsible for collecting payments. Unfortunately, debt collectors have been known to use some underhanded tactics in order to collect payments. The good news is that the Fair Debt Collections Practices Act, or FDCPA, has established laws which stipulate acceptable conduct for collecting debt.

It may be possible to clear a charge off by talking to the original creditor-not the collection agency. A collection agency has no power to remove charge offs. Be prepared to negotiate and convince the creditor that you are serious about paying in exchange for the removal. Know how much of the debt can be paid up front and a schedule of payment that can be followed.

Keep in mind that it may be very difficult to convince a company to remove a charge off. Accordingly, they should be avoided at all costs. It is always worth it to work with a creditor to pay a debt before it gets referred to a collection agency.