Charge Off

One of most negative items that you can have show up on your credit report is a Charge-Off. This is usually soemthing that is influenced from not making your credit card payment on for at least six (6) months in a row.

A charge-off can remain on your credit history for up to seven (7) years from the date that your credit was marked as charged off. During this time, your credit may have already suffered an extensive amount of damage. However, there are a few way to relieve some of this damage.

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How a Charge Off Works

A charge off is when a credit card account holder fails to make payments for a total of 6 consecutive months in which would lead to a creditor writing it off in their books as a loss in debt. The credit card account would then be canceled out and a full past due amount is now required.

Accruing a charge off is dertainly not a positive thing, as it can result in a decline in credit card approvalas well as a reduction in credit limits.

Also keep in mind that if a charge off is not paid off in full, the creditor can take legal actions towards the account holder, such as wage garnishment or worst off; a lawsuit.

How Effective is a Charge Off

A charge off to lenders and future creditors alike are considerably looked at and can influence for the decision in denying any type of loan application. If you do have a charge off, it would be the wisest decision to try and have it removed from your credit report as soon as possible. Consumers in this type of situation would usually make an attempt to negotiate with the creditor to see if the payment can be reduced or if the damage can be lessened on their credit.

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Contacting the Creditor

Majority of the time, after a few time of trying to collect from the borrower, the account will be turned over to a third party debt collector after a charge off date. Once it leaves the creditor and is turned over, they may be very little you can do to prevent what goes on you credit report. You may be able to pay it off still, but the creditor has already reported the debt to the credit bureaus. This would now be something that the third party collections agency may not be able to change.

If you would like to really try and have the charge off taken off your report, you may be able to still try and contact the original creditor and start negotiating. What creditors are seeking is their payment that is owed by the borrower.

Before you make your call to the creditor, it is a good idea to come up with an amount of the payment that you can make towards the delinquent account. Considering a higher amount to pay can work in your favor, as this will give you more power to negotiate. If you can, however, paying in full would be your best bet at having your charge off removed a lot quicker and you can even ask to speak with someone who has the capability to remove the charge off.

If you are unable to pay the amount that you owe in full, you may be able to negotiate a payment plan to see if you can have the charge off status removed from the credit report. It is important that you remain calm and professional at all times and try not to point fingers at the creditor or throw in any excuses. Try your best to keep your side of the story short and simple but to the point.

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Pay to Delete Letter

A pay to delete letter is different method of attempt in having a charge off removed. This is a letter to the creditor asking for a removal of a charge off in exchange for the full payment amount. However, you must make sure that the letter gets to the right person to have this be a successful attempt. Before mailing out the letter, you should try finding out the name of the manager or someone who may have the upper hand in the company who can complete this type of work for you.

In circumstances where you just absolutely can not get the creditor to agree for the removal of a charge off, you may try to ask for a “closed” status instead.

Try and get the agreement in writing by:

  1. Get the agreement faxed over to you on a company letterhead
  2. You can write the agreement out yourself and send it to the person you spoke with to have them sign it and send it back to you.

Note: if you do decide to go with option two, you should definitely send it as a certifeied letter so that way you know it reached that person.

Whatever it is that you choose to do, it is best to have the agreement on paper prior to paying anything to them. Once you have done your part and the creditor has also, you should check back on your credit report to make sure that the charge off is completely removed. Keep in mind that if you were not able to reach an agreement with the creditor, you can still either pay the account off or have simply wait it out. Yes, it is still going to affect your credit, but as time passes, negtaive items will drop off.

However, if you are planning on obtaining a mortgage loan or car loan, some lenders may not grant any loans to you if you have not fulfilled any past due amounts that show up on your credit report.

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Buy Again After a Charge Off

There is no such thing as an official waiting period of waiting to get a mortgage after a charge off.  That said, if a charge off can be avoided, it is the best-case scenario. However, this is not always a reality, and having a charge off is not a complete albatross. Talk to the creditor and work to get it settled or removed completely. Ultimately, a “settled” or “paid” charge off does not immediately eliminate your chances at a loan, but it could affect interest rates and loan limits.

If you have a charge off in your credit history, be sure to speak with a loan officer about what this means about your ability to get a mortgage.  A good loan officer can help you understand your options and show you how to buy again after a charge off.

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