Charge Offs and Bad Debts
Did you know that having just one charge off on your credit report can keep you from being approved for credit? Creditors see a charge off as a sign that you have not been responsible with your finances in the past and cannot be counted on to fulfill your financial obligations in the future. Unfortunately, charge offs can be remain on your credit report up to 7 years. However, there are steps you can take to remove them.
That’s great, but what exactly is a charge off?
A charge off is basically a bad debt. When a creditor is unable to collect on an account they write it off. Creditors usually write off bad debts after a certain amount of time (usually 180 days or so without payment) for tax reasons. Every year, corporations file a Profit And Loss Statement with the Internal Revenue Service. All of the year’s bad debts are added together as an item in the “Loss” section of the P & L Statement, and are deducted from the corporation’s tax return, much like other business expenses. To creditors, bad debts and even fraud are simply part of the cost of doing business.
Once it’s been charged off, do I still owe it?
Of course you do. The debt is still legally valid and the creditor can attempt to collect the full amount. Most creditors will sell or assign the account to a debt collector. So, here’s what happens: The original creditor reports the account as a charge off and the collector reports it as a collection account. So, now you have 2 negative accounts on your credit report.
Ok, so what if I pay it off?
Paying off a charge off will not remove it from your credit reports. It will simply be updated to a “paid charge-off,” which is slightly better, but still considered a seriously derogatory item and can still remain on your credit report for 7 years.
Yikes! So, how can I get charge offs removed?
Through creditor negotiations and credit bureau disputes, you may be able to improve the status of the charge off or completely remove it from your credit reports. In exchange for resolving the debt, your creditor may be willing to remove the account or report it as “paid in full.” In the event where a charge off is being inaccurately reported on your credit reports, you can dispute it directly with the credit bureaus.
Learn more about removing charge offs!
Related posts:
- Credit and Charge-offs: Three Possible Solutions to Increase Your Credit A charge-off occurs when you are so far past due...
- Paying the Debts of the Deceased – What You Don’t Know Could Cost You Some debt collection agencies are taking their collection practices to...
Related posts brought to you by Yet Another Related Posts Plugin.
