Not only does a charge-off look bad on your credit report, it can also keep you from getting approved for loans or credit cards. While getting a charge-off removed from your credit report is difficult, it’s certainly possible.
The key is to know what to do and what not to do before you start the process. If you succeed, you could see a big improvement in your credit score, making it well worth the effort.
What is a charge-off?
A charge-off is a credit account where you failed to pay the balance, and the creditor has charged it off from their records. It essentially means they deem the debt uncollectible and don’t expect you to pay what you owe.
It usually happens after you have failed to make a credit card payment for at least 180 days. Some creditors may pursue payment and offer payment options for even longer to give you a chance to pay the debt.
Once they determine it will not or cannot be paid, they typically close out the account so that it doesn’t stay on their books. This part of the process is known as a charge-off.
Of course, the creditor has probably been reporting missed payments for several months, already causing a drop in your credit score. So, can you get a charge-off removed before the seven years is up? Occasionally, the answer is “yes,” but it’s not an easy process. Let’s explore a few different options you have.
Hire a Professional to Remove a Charge-off
One way to attempt to get a charge-off removed is by having a credit repair company do the work for you. Credit repair companies go through the necessary steps of contacting the three major credit bureaus on your behalf to have the charged-off account removed.
These companies charge you a fee to remove negative credit items, including charge-offs. You still have to pay the fee regardless of the results, but most reputable companies guarantee that they’ll perform certain services for you.
There is a lot of work involved in getting a charge-off deleted from your credit reports and it helps to have experience and legal expertise on your side. It also saves you a lot of time throughout the process.
File a Credit Dispute On Your Own
The other option is to dispute the charge-off with the credit bureaus on your own. You’ll need to know the process, and you’ll have to put in some effort. It’s also wise to familiarize yourself with the Fair Credit Reporting Act (FCRA). The FCRA is the law that governs three credit bureaus and allows you to dispute any items on your credit report that you deem to be questionable.
Start by familiarizing yourself with the process and keeping careful records of the steps you take. In some instances, you may want to be prepared to pay the charged-off account. This gives you additional leverage to negotiate with your creditors, even if it’s just a partial payment.
Next, you’ll need to grab a copy of your free credit report from each credit reporting agency; Equifax, Experian, and TransUnion. Then, you must write a credit dispute letter to each of the credit reporting agencies reporting the charge off on your credit report. They will have 30 days to verify that the information is accurate or they must remove it from your credit report.
Removing a negative item from your credit history isn’t easy, especially with a charge-off. You’ll need to find some important information and take several steps to reach your goal. You should also be aware that you may restart the timeline for how long the item can remain on your credit reports or be collected on.
Check with your state’s statute of limitations and always reach out for legal help if you’re worried about resetting the debt clock. Once you get started taking the necessary steps, you should see a positive result even if it isn’t the exact desired outcome.
What other options are there for removing charge-offs?
No matter what route you take, it may not happen exactly the way you want it to. However, you may still benefit from this task by having the status changed to closed or paid. It may also say settled instead of just being charged-off.
While these options aren’t as beneficial as getting the charge-off completely removed, it does help your credit scores and future credit applications because the potential lender or credit card issuer sees the account as resolved. There are a few different ways this can happen.
Settled means the charged-off account has been paid but was paid either in collections or for less than the full amount. It may even state on your credit report “Settled for less than the full amount.” Paid or closed status implies that the debt was paid in full. This is the preferred option if you cannot get the account removed.
If you can’t pay the full amount at once, you may be able to make regular payments until the obligation is fulfilled. You’ll first need to look at your budget before you contact the creditor to determine how much you can pay and when. It’s better if you can pay the full balance, but you can work with whatever you can afford.
Contact the Creditor in Writing
Your first attempt should be to contact the original creditor (usually the bank that has issued the credit card) in writing. The creditor is the one who reported it as charged-off, and they are the only ones that can have it removed.
They may be able to work with you if they still own the account. However, some creditors sell their accounts to collections agencies, which means they can no longer negotiate with you on payment.
If you cannot work with the creditor, contact the debt collection agency. Just know that the credit card account may still be noted as a charge-off from the creditor in this situation. Still, it typically benefits you to get it taken care of.
It’s always best to write a letter to the creditor so you can have everything in writing. Keep a copy of every communication that occurs and request a return receipt.
Send a Pay for Delete Letter
You can also write what is known as a pay-for-delete letter to the creditor in an attempt to get charge-offs removed from your credit reports. In this letter, you state that you are willing to pay the debt in exchange to have it deleted from your credit report. You need to be specific in your letter as to what action you want the creditor to take.
The information should not only be removed from the original creditor but from the third-party debt collector as well. You should also request that they send you a written reply agreeing to the terms before you make the payment.
Another thing that must be stated is the fact that you are not admitting to the debt or to a payment agreement unless the creditor agrees to your request.
In basic terms, you are agreeing to pay it in full to have it taken off your credit report. However, you have to be detailed in your communication to ensure you get the exact result you want.
If you leave anything out, the creditor may take advantage of that fact and not delete the account. This is a good example of when it’s beneficial to get help from a professional credit repair firm. They have the legal know-how to make sure the language is perfectly in your favor.
Will a Pay-for-Delete Letter Work?
No creditor is obligated to meet the terms of a pay-for-delete letter. It’s really up to them whether they agree or not. If it means they’ll get the money owed to them, they may be willing to do it. However, many creditors and collection agencies require that it’s paid in full. Otherwise, they won’t be willing to delete it on your behalf.
Of course, if you only have a partial payment, you can still attempt to negotiate with them. Just don’t be surprised if they turn you down. If you must make ongoing payments to pay off the balance, you probably won’t get the account deleted, but it will be marked as a paid charge-off once you’ve submitted the final payment.
Another method is to request verification of the debt. You can do this if there is doubt that the account is yours or if some information on the account is incorrect.
It’s also helpful if the debt has been sold and resold to various debt collectors so you can confirm you’re dealing with the right one.
Many unscrupulous debt collectors won’t say no to a payment even if they don’t own the debt anymore! If the creditor cannot verify the account, it must be removed from your credit report.
Credit Bureau Disputes
You can contact the credit reporting agencies that list the account: Equifax, Experian, TransUnion. One or more may have the charge-off listed on your credit reports.
Tell them you want the account verified, and the creditor will have 30 days to respond. If they fail to provide the information necessary to verify the account, it must be taken off your credit report.
In most cases, this action only works with a collection agency because the original creditor will most likely have records. However, some agencies falsely represent themselves to people in an attempt to get paid for the account. Under the Fair Credit Reporting Act, you have a right to request verification with any debt.
How does a removed charge-off impact your credit scores?
You may think that getting a negative account deleted from your credit reports will give your credit score a big boost. However, this is not always the case.
Anytime you can get negative accounts removed, it will make your credit report look better. But as far as your actual credit score, older accounts will have less of a positive impact than newer ones.
If the account is less than two years old, you may see a boost in your credit score by as much as 100 points. In addition, paid charge offs are better than unpaid charge offs, on your credit report. However, you may only see minimal improvements in your credit score. So, it’s really best to get a charge off removed if possible.
Once an account has been settled, it will tell other future lenders and credit card issuers that you have made the effort to rectify a bad situation.
Just remember that one account is not the only thing that lenders look at. They view other information such as current accounts and any that have been past due by 30 days or more.
It’s just as important to maintain open accounts in good status as it is to work on old negative accounts. Even being able to settle an old account does not prove that you are now capable of handling credit as much as having an open account in good standing.
While getting a charged-off account eliminated from your credit report is a worthy task to take on, it can be complicated and challenging.
Be prepared by knowing how a pay-for-delete letter works and what you can promise in your negotiations with the creditor. Understand your other options if it cannot be removed or if you cannot pay it in full.
Finally, it is just as essential to work on other credit items as it is to remove a negative one. However, if you are able to get a charge-off account taken off, it’s one step in the right direction towards an excellent credit score and obtaining new credit whenever you need it.
Be persistent and willing to put forth the necessary effort, and you just might get the results you want.