If you have a charge off on your credit report it is important to take action and get it fixed. A charge-off can significantly damage your credit score and make it difficult to get approved for new credit cards, loans, or housing. In this blog post, we are going to go over What is a charge off and how to fix a charge-off on your credit report and improve your credit score.
What Is A Charge-Off?
A charge-off is when a creditor decides that you are not going to repay your debt and they write it off as a loss. This usually happens after 180 days of nonpayment. Once a debt is charged-off it will stay on your credit report for up to seven years. Having a charge-off on your credit report will damage your credit score and make it difficult to get approved for new credit.
If A Creditor Writes Off My Debt Do I No Longer Have To Pay It?
No, you still owe the debt even if it is charged off. The creditor may eventually sell your debt to a collection agency but you will still owe the money. It is important to remember that just because a debt is charged-off does not mean you no longer have to pay it.
How to Fix a Charge-Off
If you have a charge-off on your credit report the first thing you need to do is contact the creditor and try to negotiate a payment plan. If you can't reach an agreement with the creditor you can dispute the charge-off with the credit bureaus. You will need to send a letter to each of the three credit bureaus (Experian, TransUnion, and Equifax) explaining why the charge-off is incorrect.
If you are able to get the charge-off removed from your credit report it will improve your credit score. It is important to keep in mind that even if you are able to get the charge-off removed from your credit report you still owe the debt.
How to Avoid Charge-Offs
The best way to avoid having a charge-off on your credit report is to make sure you make all of your payments on time. If you are having trouble making ends meet it is important to contact your creditors and try to work out a payment plan. If you are unable to make your payments on time it is important to at least make the minimum payment.
Making the minimum payment will help you avoid having your debt charged off but it will also damage your credit score.
Why Will Making The Minimum Payment Damage My Credit Score?
When you make the minimum payment on your credit card, it shows that you are only paying the bare minimum towards your debt. This can be interpreted as irresponsible financial behavior and will damage your credit score. If you are having trouble making your payments on time, it is important to reach out to your creditor and try to work out a payment plan.
If I Pay Off A Charge-Off Will My Credit Score Increase?
Yes, if you are able to pay off a charge-off it will increase your credit score. However, it is important to keep in mind that the charge-off will still stay on your credit report for up to seven years.
Paying off a charge-off will improve your credit score but it is still going to take some time for your score to recover.
Over time, it will have less impact on your credit score but it is best to try to pay it off.
Should I Pay Off An Old Charge-Off?
If you have an old charge-off that is no longer being reported on your credit report it is not necessary to pay it off. Once a debt is charged-off it will stay on your credit report for up to seven years. After seven years the charge-off will fall off of your credit report and will no longer impact your score.
What Can I do If the Charge-Off Is Still On My Credit Report After 7 Years?
If the charge-off is still on your credit report after seven years you can dispute it with the credit bureaus. You will need to send a letter to each of the three credit bureaus (Experian, TransUnion, and Equifax) explaining why the charge-off is incorrect.
Do not let your emotions cause you to buy things you are not financially ready to buy. If you find yourself in hardship it is important to communicate with your creditors. They may possibly give you a deferment or work out a smaller payment plan with you.
You may feel embarrassed to call, but it is better to call and work something out than to let your debt become a charge off and drastically pull your credit score down.
For more information on how to fix a charge off on your credit report contact us for a free consultation. You do not need a credit repair company to fix your credit report but if you find yourself not having the time or not understanding exactly what to do we specialize in helping future homeowners repair and improve their credit so they can confidently apply for a home loan. For a free consultation schedule an appointment today.
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