Three Ways to Remove a Charge-Off From Your Credit Report

If you fall far enough behind on your bills and eventually default, you may start seeing or hearing the term “charge-off.” The term charge-off can be a little misleading, and some people even believe that a charged-off debt is one that is no longer owed. Yet, despite many hopeful wishes to the contrary, that is not the case whatsoever.

Charge-off is simply an accounting term that signifies that a creditor has written off your debt for tax purposes. The debt, however, is still very much owed, and the creditor may continue collection efforts on the account. Often, though not always, charged-off debts are turned over to third-party collection agencies and even collection attorneys.

Charged-off debts can also be reported to the credit reporting agencies. In fact, they have been a part of consumer credit reports for decades. As you can imagine, charge-offs are considered to be negative credit events, and they can lead to lower credit scores.

If you do have a charge-off or multiple charge-offs on your credit reports, you may be wondering if there are any ways to have them removed. The answer is: Yes, it’s possible. Here are your three options.

Option #1: Dispute

The Fair Credit Reporting Act (FCRA) gives you a number of rights when it comes to the information on your credit reports. One of those is the right to dispute any information on your credit reports that you believe to be inaccurate or unverifiable.

This means if you disagree with how a charged-off account is appearing on your credit report or you don’t believe the company furnishing the information can actually verify it, you have the right to dispute it and possibly have it removed.

When you dispute a charge-off, the credit reporting agencies (CRAs) are legally obligated to investigate your claim. The CRAs will generally have 30 days to process your dispute, though in some cases it can be as long as 45 days. If a disputed account cannot be verified as accurate, the law requires the CRAs to remove the item from your credit reports at the conclusion of their investigation and send you a copy of the results.

Option #2: Pay-for-Delete

If you acknowledge that the item is correct and verifiable, then a dispute may not be the most effective option. But, a “pay-for-delete” settlement is another potential way to remove a charge-off from your credit reports.

A pay-for-delete agreement refers to a deal you make with a lender, where they agree to remove an account from your credit reports if you pay an agreed-upon amount. Make sure to get whatever deal you’ve negotiated in writing. Otherwise, you could pay the debt and still be stuck in a he-said-she-said situation if the charge-off remains on your credit reports with a zero balance after payment.

It’s worth noting that persuading a lender to remove a charge-off from your credit as part of a settlement agreement is a long shot, as it runs counter to their agreement with the credit bureaus to only delete items that are incorrect. Lenders aren’t supposed to remove items just because they’ve been paid.

Option #3: Run Out the Clock

If you’re not fortunate enough to have a charged-off account removed from your credit reports early through one of the above options, the only thing you can do is to sit back and wait.

A charged-off account can remain on your credit reports for a full seven years from the date the original account first went late leading to the default. The good news is that your charge-off will generally impact your credit scores less and less as it ages.

More by John Ulzheimer:

John Ulzheimer is an expert on credit reporting, credit scoring, and identity theft. The author of four books on the subject, Ulzheimer has been featured thousands of times over the past decade in media outlets including the Wall Street Journal, NBC Nightly News, The Los Angeles Times, CNBC, and countless others. With professional experience at both Equifax and FICO, Ulzheimer is the only credit expert who actually comes from the credit industry. He has been an expert witness in over 230 credit related lawsuits and has been qualified to testify in both federal and state courts on the topic of consumer credit.