A charge-off means that you had an account with the creditor, but you have missed payments towards it, so it has been closed and written off as a loss. As a result, the account will appear as charged-off on your credit report.

Charged-off accounts can be passed to a debt collection agency by the creditor, and you are still legally obligated to pay the amount owed.

How long before an account is charged off?

An account can be charged off if you miss a payment and it has been at least 120 days since you made the last payment.

It can also occur if your account terms haven’t been met or if you file for bankruptcy.

Creditors will contact you to rectify the situation before the account is passed to a debt collection agency or sold.

How does a charge-off affect my credit report?

Typically a charge-off will be added to your credit report along with missed or late payments, which will impact your credit score.

A charge-off is applied to your credit report if the original creditor and the debt collection agency report it to either credit bureau.

If you pay the debt, it will be updated as a paid charge-off. If the debt was passed to a collection agency, then it may show as a paid collection.

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How long does a charged-off stay on my credit report?

Charged-off accounts stay on your credit report for up to six years from the date of the first missed or late payment on the charged-off account.

If you pay the account before this period has finished, It will remain on your credit report but may have less impact on your credit score.

How to resolve a charge-off

If you have a charged-off account, contact your creditor or lender, who may be open to negotiating a payment plan or settlement.

Source: Equifax: What is a charge-off?

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