How to Remove A Charge-Off
A charge-off occurs because of serious defaulting on an account, that is, you are late by 180 days or more. Your creditor will list the account as “not collectible” when a charge-off occurs. Lenders will list a debt as a charge-off mainly for tax reasons; so, the item can be considered a loss. However, they will still expect you to pay the debt.
Even with a charge-off on your credit report, creditors will not stop trying to collect the debt. Charge-offs remain on your report for seven years. They can greatly impact your score. A charge-off on your credit report is one of the worst items you can have and even one can cause your loan applications to be declined.
However, there is a way to remove it from your report before the seven years is up. Paying a charge-off is better than not paying it at all and may impact your score slightly. Nevertheless, it is still a negative item even when you pay it and will influence your score until it expires.
The impact lessens with time, but potential lenders will see it. Therefore, your chances at low interest rates and credit approval might still get hurt. When to Pay A Charge-Off? The charge-off is recent: a new charge-off can really reduce your score.
The higher your credit score, the more points it will deduct. If you can, pay the charge-off and ask your creditors to remove it from your report. You must pay it to qualify for a home loan: in most cases in the mortgage industry, you will be required to clear off all your debt before you can get a loan. Talk to the lender to see how you can settle the debt. Pay it if the creditor will re-age/delete it: if you clear the debt totally, some creditors will have no problem removing it from your file.
Others might agree to re-age the debt. When Not to Pay A Charge-Off? The charge-off is listed with different companies: if a charge-off is listed with multiple collection agencies, make sure you verify the current owner of the debt before paying it off.
You are not sure the amount listed is what you owe: debt collectors may add phony interest and fees. If you did not sign an agreement with the original creditor to allow third-party agencies to add their own interest and fees, they cannot do this.
A debt that you paid off can also erroneously end up as a charge-off on your report. It is past the statute of limitations: nonpayment of a debt cannot be brought against you if it is past the statute of limitations.
Can A Charge Off Be Deleted from Your Credit Report?
One way to have a charge off removed is by agreeing on a “pay for delete” arrangement with your creditor. Try carrying out the negotiation in writing. Secondly, you can file a dispute with the credit bureaus. If the charge-off account cannot be verified, they are required to remove it from your report.
Charge off Sample Letter
To [name of creditor],
This letter is about a debt claimed under the account number listed above. I wish to settle this debt in full without prejudice, in return for the removal of the “charge-off” status with the credit rating agencies.
This is not an admission of the debt or a payment agreement unless you agree to have all information related to this debt removed from my credit file. In return for your removal agreement, I am willing to make payment in the full amount of [$XXX.XX] to be sent by certified funds, payable to [name of creditor].
If this is acceptable, please acknowledge the details of this agreement in a letter written on your company’s letterhead. You will also agree to contact the collection agency to inform them of the dismissal of the aforementioned debt.
Also, please be aware that as per my rights under the Fair Debt Collection Practices Act, I have a right to request full verification of this debt and to dispute it unless full verification is made. This offer is valid for 14 days from the date of receipt, after which it will be withdrawn and I will exercise my right to full verification.
