A charge off on your credit report leads to a HUGE drop in your credit score. Some experts say that if you remove a recent charge off from your credit report, you can see an INCREASE in your credit score of up to 150 points!
If you don’t know what a charge-off is, it’s what happens when a lender has exhausted all means of collecting the debt from you. Your debt is written off as a loss in the creditors accounting book. The creditor will close the account (if they haven’t already done so) and while they report it as a charged off account to the credit reporting agencies. They may also sell the account to a collection agency, who will then put this account on your credit report as a collection. THUS causing your credit score to drop even more.
Though, the status “Charged off” sounds like you’re getting rid of the debt you owe. As long as the charge-off isn’t paid, the creditor can continue and try to collect on the account as well as having the right to sue you, until the statue of limitations runs out. By the time your debt is charged off, your credit score has already taken considerable damage. The account would have been reported as 30 days, then 60 days, 90 days and more than 120 days late. And even If you somehow manage to pay off the charge-off, your bad credit score won’t improve if you don’t take a few steps first.
How To Get Charged-off Accounts off Your Credit report?
Recovering your credit score after a charge-off can be complicated but is possible. Here are the top ways to get charged off accounts off your credit report.
Talk To Your Creditor
The simplest and most straightforward method of having a charged off account removed from your credit report is by talking to the creditor and agreeing to remove the charge off if you can pay the debt . Most of the time they will act like it needs to be paid in full. But if the debt is old you can start negotiations at less than 50%. If its VERY old (almost ready to fall of the credit report, but you need to get it paid to get your home loan – start off as low as 30% and don’t tell them you are looking for a mortgage! If they find out you are looking for a mortgage, they will know you MUST pay off the debt to get qualified and they will not settle for anything less than the full amount! in full.
Once you reach an agreement, get it in writing! Never send money to a creditor or a collection agency without having the agreement in hand. Not in the mail. But in your hand!
When you negotiate, you want to make it clear that you want them to remove the trade line from your credit report. And you want a Paid for deletion letter. If they don’t have one, you can send them one (we have one on our site)
If you can’t pay the full amount immediately, talk to the creditor and let them know that you are willing to set up a payment schedule. And you can have the agreed to amount fully paid by “X” date by making “X” monthly payments in the amount of “X”. As long as at the end of the payment period they remove their trade line from your credit report. Get the “Paid for deletion” sample letter here.
Sometimes no matter what, the creditor wont’ remove themselves. You will want them to list themselves at either Paid or Closed. Its still a negative mark on your credit report, but it won’t stop you from getting a home loan.
Validate the Charge-Offs
Another way of dealing with charged off accounts is through the dispute process. You can start trying to find errors in the way it appears on your credit report. Is it being reported correctly? Is the amount, date, number of late days correct. Make sure when you dispute these items that you don’t mistakenly give them information you don’t want them to know. For example, you say I didn’t owe them $4,000, I only owned them $3800! The lender will just adjust the amount (if they have nothing to prove their $4,000 claim) and use your statement as verification!
That is why, even when we write Paid for deletion letters. We use the wording “we are not verifying that this debt is ours or that we owe this amount”….. We do that so that they can’t use the letter as a means of verification.
Just keep in mind that even if the debt gets removed. It may come back. If the debt is truly yours and the creditor provides the proof it can be put back on, even if it’s been removed before. The credit reporting agencies will send you a letter 5 days before the put it back on your credit report, to let you know that the debt has been re-verified
Hire A Professional
Having a charge off removed from your credit report is a lot of work and effort. If you want the charge off removed without much of a hassle, it’s highly recommended you contact a professional credit repair agency that can have the charge off removed on your behalf. A professional credit repair agency knows how to get the job done and in most cases, they can get a charge off removed much faster and for less money. Just make sure they have a debt settlement process.