By the time an account gets charged off, your credit score has already suffered significant damage. Your credit card issuer may have also lowered your credit limit. If you applied for a credit card in the months leading up to your charge-off, your application might have been denied. Once a charge-off is on your credit report, it will remain there for seven years from the date it was charged off. That is a long time to have such a negative entry on your credit report.
Charged-Off Doesn’t Mean Forgiven
Don’t let the name fool you. You’re still responsible for paying a charge-off. Future creditors and lenders take charge-offs seriously, to the point that they may deny any future credit card and loan applications, so it’s in your best interest to remove charge-offs from your credit report. Negotiation is your best tactic for reducing the effects of a charged-off account on your credit.
Talk to the Creditor
Often, charge-offs are passed on to a third-party debt collector soon after the charge-off date. When it comes to charge-offs, it’s better to deal with the original creditor (who reports the charged-off status) than a debt collector. A collector can’t do anything about what the original creditor reports to the credit bureaus. You want to convince the creditor to remove the charge-off from your credit report in exchange for payment. Before you make the call, know how much you’re able to pay on the account. The more you can pay, and the sooner you can pay it, the more negotiating power you have. If you can pay in full, you’re in a better position to negotiate. Ask to speak to someone who has the authority to remove the charge-off from your credit report. Let the creditor know you’re interested in paying the account and would like to make payment arrangements in exchange for having the charged-off status removed from your credit report. Speak politely and professionally. Avoid blaming the creditor, making excuses, or giving your life story. Keep it short and to the point. Ideally, the creditor will agree to remove the charge-off from your credit report. Sending a pay-for-delete letter is another way to negotiate a charge-off removal. The letter essentially asks the creditor to remove the account from your credit report in exchange for full payment. The key to a successful pay-for-delete letter is getting it in the right hands. Try to get the name and direct address of someone who works in the company, a manager, or other higher-up employees, rather than sending your letter to a general correspondence address. It can be difficult to get a creditor to agree to remove the charge-off from your credit report. Even so, some cardholders have been successful in making a pay-for-delete agreement.
Get the Agreement in Writing
When the creditor agrees to remove the charge-off from your credit report, get the agreement in writing. You can do this in one of two ways: Avoid making payment until you have the agreement in writing and can prove beyond the shadow of doubt someone from the creditor’s office agreed. Once you have fulfilled your part of the agreement, check your credit report to make sure the creditor has removed the charge-off.
When You Can’t Get Your Way
If your negotiation fails, and you can’t get the creditor to budge, decide whether you want to pay the account or not. Even though the account will continue to be reported as charged off until the credit reporting time limit is up, it will affect your credit score less as time passes. However, some lenders will not grant you new credit or loans until you’ve taken care of all past-due accounts. So, if you plan to get a mortgage or auto loan in the next seven years, it’s better to pay the account. Once it’s paid, make sure your credit report reflects the payment.
