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3 Ways To Remove a Charge-Off From Your Credit Report

A charge off on your credit report can significantly lower your credit score. Your credit score is a measure of how likely you are to pay back a loan or credit card on time. So if you want to borrow money at some point in your life (and let’s be honest, we all will), it’s critical to keep it as high as possible.

Let’s take a closer look at the importance of a credit score and how a charge-off affects the score. I’ll also walk through a few ways of removing a charge-off from your credit report.

Importance of Credit Score and Credit Report

A credit score indicates your financial capability to repay a loan or credit card. The higher a credit score, the better the chance of repayment.

For example, you can buy an item from a store using a credit card. You can also use an auto loan to buy a car, a mortgage to purchase a home,  or use a  personal loan for … whatever. A good credit score will help you qualify for each of these products, and with competitive terms. 

If you fail to pay back the amount you borrowed, this is reported back to the credit bureaus (creators of the credit scores), and will bring down the overall score.

What Is a Charge-Off on Your Credit Report?

A debt collector marks your account as a charge-off when you have failed to repay the debt. This is typically deemed uncollectable after 6-12  months. At this point, the holder of the loan or credit card marks it as a loss.

Unfortunately, this doesn’t mean you’re off the hook. You still need to repay the debt. The company you took the loan or credit card from will continue to pursue collection or, more likely, they will sell your debt to a professional debt collection firm to pursue. At this point, your credit score will almost certainly be negatively affected. It’s also important to note that this charge-off can remain on your credit report for up to seven years. 

3 Ways To Remove a Charge-Off From Your Credit Report

You can propose to pay the charge-off amount in return for removing the entry from your credit report. If the charge-off was made in error, you can challenge the charge-off with any or all of  three credit bureaus that are falsely reporting it. You also have the option of having a professional credit repair company take care of it.

1. Propose to Pay the Charge-Off Amount 

If you propose to pay the amount off, make it contingent on removing the charge-off entry from your credit report. This option only works if you haven’t already paid it off. This is the leverage you have in the negotiation, so don’t squander it. There may also be an opportunity to negotiate down the amount you pay back. Remember, they’ve already booked this as a loss, so depending on how long overdue it is, it may be a win for them to get 20% or 30% of that ‘loss’ back. 

Whatever you agree to, make sure to get in writing!

The creditor may claim that they can’t legally get the charge-off removed. This isn’t true, don’t be afraid to stand your ground.

2. File a Complaint Against an Errored Charge-Off

Many times, there may be an error in the charge-off entry. If you think the charge-off is inaccurate you can challenge it to the credit bureaus. This is one of the best ways to remove a charge-off without paying.

If your claim proves to be true, the credit bureaus will remove the entry from the credit report.

It is crucial to know that you can challenge the entry even if there is a minor mistake in your credit report. Once you file a dispute, the credit bureaus will do the investigation and edit or delete your charge-off entry based on their findings.

In some cases, it is also possible that the charge-off was incorrectly added to your credit report. You should be quick to challenge such entries to the credit bureaus.

You should also inform the creditors immediately when you file a dispute. Eventually, it is the creditors who will need to get the entry removed from your report.

Lastly, if you’re writing a letter to the credit bureaus to challenge the charge-off, remember to send it to all the three bureaus – Equifax, Experian, and TransUnion.

3. Hire a Credit Repair Company To Remove the Charge-Off

There are companies that specialize in removing charge-offs. You can contact such agencies to get help to remove the charge-off for you. 

If you don’t have the time, or have multiple charge-offs to deal with, or just want an expert to help guide you through the process, this is your best route. The all-in cost of a few hundred dollars is typically worth the money saved and the headaches avoided. 

One of our favorites is Credit Saint, but you can check out the full list of best credit repair companies here. 

What Should a Sample Letter to Remove Charge-Offs From Your Credit Report Include?

Once you know the options you have to remove the charge-off from your credit report, you can decide the best course of action. If you decide to propose an agreement to the creditors to remove the charge-off, it’s essential to make a case for yourself and do it in writing.

A sample letter to remove the charge-off from the credit report will contain all the details about your debt including the total amount you owe and the amount you’re willing to settle for. Your letter should ask the debt collectors to reply in writing if they agree to your terms. 

Most importantly, ask the debt collectors to completely remove the entry of a charge-off from your credit report. Marking the amount as ‘Paid Charge-off’ will not improve your credit score. 

Know Your Rights

Having a charge-off on your credit report can be overwhelming. But if you know your rights and the options available to you, you can take control of the situation.

Debt collectors or creditors are quite persuasive when it comes to getting their money back. This is why the Federal Trade Commission has the Fair Credit Reporting Act in place to protect you. Start out by gathering information and knowing the law. And then hire experts to get help from.

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