Charged-off accounts show up on your credit report and stay there for seven years, dragging down your credit score and potentially hindering your ability to get new credit. However, what you may not know is that there is a way to legally remove charge-offs from your credit history. And best of all, you can do it on your own, without hiring an expensive credit repair firm.
Definition
A charge-off is a debt that the lender who originally extended the credit has been unable to collect on. When lenders decide that collection efforts are fruitless, they will sell the debt to a collection agency. The new account is called a charge-off.
Problems
Paying a charge-off may help you seem more creditworthy to other potential lenders than if you simply waited the seven years it would take for the charge-off to roll off your credit report. However, the paid off account typically still remains on your record for seven years from the time it was paid off and will still negatively impact your score while it remains on your record. A second problem is that charge-offs are reported separately from the original debt, so you may have two negative entries on your credit report for a single debt.
Solution
"Pay for delete" is a commonly used strategy for removing charge offs from a credit report. This entails contacting both the collection agency and the original creditor and getting written agreements from each stating that they will delete the accounts altogether or delete the negative information from your credit report immediately after receiving payment. However, be aware that larger companies may refuse to delete an account completely.
Result
Once you submit payment, your credit history should stay "pay as agreed" or "account closed -- paid as agreed," unless the account was to be completely deleted. Make sure this is written into your agreement with the lenders, and check your report after paying the debt to ensure both the collection agency and original lender made the agreed-upon change to your report.
Considerations
Accounts older than seven years from the date of charge-off should not appear on your credit report, although they are sometimes erroneously reported beyond the roll-off date. Rather than paying to have these deleted, simply contact the credit bureaus -- Equifax, Experian and TransUnion -- and dispute the accounts to have them deleted in accordance with the law.
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