A charge-off is when a creditor writes off your unpaid debt as a loss, usually after about 180 days of missed payments. You still owe the money, and the debt may be sold to a collection agency. A charge-off is a serious negative item that can stay on your credit report for up to seven years.
Understanding what a charge-off is and its impact on your credit score can help you plan your next steps, including what you can do about a charge-off on your report.
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What Exactly Is a Charge-Off?
According to Experian, a charge-off happens when a creditor, like a bank or credit card company, decides you are unlikely to pay a debt. This usually follows a long stretch of missed payments, typically 180 days. The original creditor then writes off the debt as a loss and moves it out of its active accounts.
The original creditor may stop pursuing the debt directly, but it often sells the debt to a third-party debt collector for a fraction of its value. That collector can then try to recover the full amount from you. Even after a charge-off, you still legally owe the debt. Our guide to how debt collection works explains what to expect next.
How Does a Charge-Off Affect Your Credit Score?
A charge-off can lower your score in more than one way:
- Missed payments first: The late payments that lead up to a charge-off are reported along the way, and payment history is the largest factor in most scoring models.
- The charge-off itself: It is reported as a serious negative item, which lenders see when they review your report.
- A possible collection account: If the debt is sold, a separate collection entry may also appear.
The impact tends to lessen as the charge-off gets older and you add positive history, such as on-time payments on other accounts.
How Long Does a Charge-Off Stay on Your Report?
A charge-off can stay on your credit report for up to seven years from the date the account first became delinquent, whether or not you pay it. Paying or settling it doesn’t restart that clock.
Frequently Asked Questions
A charge-off is the original creditor’s entry; a collection is a separate entry from a collector. The charge-off happens when the original creditor writes off the debt. A collection account appears if the debt is then sold or assigned to a third-party collection agency, which tries to collect from you. Both are negative marks. Learn more about how long collections stay on your credit report.
Yes, if it may be inaccurate, incomplete or unverifiable. For example, the balance, dates or account status may be wrong, or the account may not be yours. Bureaus generally have 30 days to investigate a dispute, and information that can’t be verified must be corrected or deleted. An accurate charge-off can stay on your report for the full reporting period. See our guide on how to dispute items on your credit report.
Up to seven years from the date of first delinquency. That’s true whether or not you pay the charge-off.
It can help how lenders view you, but it won’t remove the entry. Once paid, the status changes from “unpaid” to “paid” or “settled,” which lenders generally view more favorably. It also shows you’ve handled the obligation. For more details, see the Consumer Financial Protection Bureau.
Moving Forward After a Charge-Off
A charge-off can affect your credit for years, but it isn’t a permanent roadblock. Check your reports for errors, decide how you’ll handle the debt (our guide to negotiating with creditors can help), and keep building positive history over time. Patience and steady habits matter most.