A charge-off, which refers to an unpaid debt, is among the most damaging negative items on a credit report.
You can currently have a charge-off on your credit record if you've been having trouble making your debt payments. Potential lenders will see a charge-off as a sign that you are a hazardous borrower. However, what precisely is a charge-off? Continue reading to find out how charge-offs operate and whether they can be reversed.
What Does Having Your Debt Charged Off as Bad Debt Mean?
Leslie Tayne, a debt settlement lawyer with the Tayne Law Group in New York and the author of the money management book "Life & Debt," explains that a charge-off is essentially a creditor writing off the debt in their books as uncollectible. "While the length of time varies depending on the creditor, this typically happens when you are severely behind on your payments. It's possible that the creditor has made collection efforts but been unsuccessful."
When you borrow money, you are required to repay the loan in accordance with the conditions of the agreement. Of course, things don't always go as planned, so it's likely that you'll forget to pay or make a late payment. This can cost you late fees and harm your credit.
If you continue to be late on payments, the debt is deemed overdue and could eventually be sold to a debt collection agency or transferred internally. The debt collector will now try to collect the debt from you once more. If those efforts are unsuccessful, it might be written off as a bad debt, nevertheless.
Your creditor will write off your bad debt 120 or 180 days after you cease making payments, depending on the kind of account. Your credit reports also reflect this.