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What is Charge Off?

What is a charge-off

A charge-off or chargeoff is the declaration by a creditor (usually a credit card account) that an amount of debt is unlikely to be collected. This occurs when a consumer becomes severely delinquent on a debt. Traditionally, creditors will make this declaration at the point of six months without payment. In the United States, Federal regulations require creditors to charge-off installment loans after 120 days of delinquency, while revolving credit accounts must be charged-off after 180 days.

The purpose of making such a declaration is to give the bank a tax exemption on the debt. The charge-off, though, does not free the debtor of having to pay the debt. Most times if chargeoffs are not paid they are sold to factoring companies (Collection agencies that buy the debt).

A charge-off is one of the most adverse factors that can be listed on a credit report. Even a paid chargeoff can and will affect your credit scores. Charge offs are allowed by law to report up to seven years from the date of last activity.

Chargeoffs on your credit report

Charge offs like other data on your credit report, are subjected to verification procedures as required by many state and federal laws if we challenge or disputes the account if they are reporting. Companies must verify that the information they are reporting is accurate and timely.

Credit Repair can be very effective to improve your credit report, which improves your credit score. As one of the tools for higher credit scores, credit repair is needed if there are paid or unpaid chargeoffs reporting on your credit file, or you can wait until the seven years after the company charges it off if they didn't sell it!

Credit Doctor Company has credit repair plans that can help remove inaccurate and untimely charge offs that are reporting on any of your credit reports including Equifax, Experian, and Trans Union. We actively engage credit reporting agencies and furnishers of information to improve your credit reports and scores.

Try our Advanced Plan for a quick start to Better Credit for Better Living.

Read more: What is the difference between paid and unpaid charge-off?

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