How To Remove A Charge-Off From Your Credit Report

A credit charge-off means the credit issuer has written the credit card account off as a loss because you are more than 180 days late on your payment. The debt may be transferred to a collection agency, and that’s where the real trouble begins.

But you do have recourse. The Fair Credit Reporting Act (FCRA) mandates that if a lender refuses you credit, they must specifically tell you why. A vague reason like “you didn’t fit our customer profile” won’t stick.

Were You Refused Due To Your Credit Score?

When people are denied credit, it usually comes down to their credit score. If this is the reason you weren’t approved, the first thing you need to do is get a copy of your credit report from the three credit bureaus – Experian, Equifax and TransUnion. And no, it won’t include your credit score. But it should tell you why you have a bad credit score, which will be due to “bad” items on your report.

Here’s what could drag down your credit score:

• Late payments
• Judgments
• Collections
• Bankruptcies
• Charge offs
• Liens

Unfortunately, a bankruptcy, lien or a judgment is out of your hands. A bankruptcy will stay on your credit report for either seven or 10 years (depending on the credit reporting bureau) and a judgment or lien will remain for seven years. These are just part of your credit history, and you have no control over them in the short term.

Dealing with charge-offs

If your credit report shows a charge-off, don’t throw in the towel—there’s a chance you can get it removed. Once you determine which lender reported your debt as a charge-off, you should immediately call them. Be aware that while your credit report will include the name of the lender, you may have to do some digging to find a phone number. When you get in touch with them, you can begin negotiating the debt and ask to have it removed from your credit report.

You will need to pay part of your debt

You’re responsible to pay a percentage of your debt, and this is where the negotiation begins. You might start at, say, 30% and see what kind of response you get. Most lenders will negotiate because they’d rather get “half a loaf” than sell your debt to a collection agency where they would get pennies on the dollar. Make it clear that you’re willing to pay part of your debt, but only if the lender agrees to remove the item from your credit report(s).

Get everything in writing

If you successfully settle your debt, make sure you get the lender’s promise that they will remove the item from your credit reports in writing. Don’t rely on verbal promises that can’t be proven by you but can be disputed by the lender. Get a letter or email detailing how much you’ve agreed to pay, and the promise to delete the item from your credit file.

Review your credit report for mistakes

It’s recommended that you review your credit report annually to help ensure it doesn’t contain mistakes that are dragging down your credit score. Look for charge-offs, judgments, liens, accounts that have gone to collection, etc. If you find some, make sure they’re really yours. The credit bureaus process thousands of items a week and errors have been known to happen.

What to do if the charge-off is inaccurate

According to a Consumer Reports survey, more than one-third of Americans found at least one error on their credit report. If you fall into this category, you have every right to fight an inaccurate charge-off. Let’s say you find a debt in your report that wasn’t yours. Maybe it was someone else’s that accidentally found its way to your credit file. You can – and you should – dispute the item. All three credit bureaus provide online forms to file a dispute.

Be aware – you can’t just say, “Hey, that debt wasn’t mine.” You need documentation to support your claim. If you do have adequate records, the credit bureau must contact the company that reported the item and request proof that it wasn’t an error. In the event the company can’t validate the item or doesn’t respond within 30 days, the credit bureau must legally remove the item from your report.

Other ways to boost your credit score

If you have a debt that’s gone to collection, the collection agency most likely gave you a heads-up. There’s a good chance you can negotiate with them to have the item removed from your credit file. The collection agency purchased your debt from your lender and for much less than you actually owe. This leaves room for negotiation. You might be able to settle the debt for 40% or less with the stipulation that, in return, the collection agency corrects your credit report to read paid in full.