If you cease to make payments on your credit card debt for long enough, the account will be charged off by the credit card company. A charge-off can result in a lower credit rating and possibly even legal action.
The Facts
A credit card company cannot hold unpaid accounts indefinitely. A charge-off is the method by which a credit card company removes unpaid debts from their computer accounting system. The company is then able to claim a tax loss on the debt.
Time Frame
Most credit card companies will charge off an account after 180 days passes without the account holder making a payment.
Features
A charge-off will appear on your credit report for seven years from the day the debt first went 180 days delinquent. A charge-off is considered to be a derogatory credit report entry by lenders who view the individual's credit history.
Effects
After a charge-off occurs, the debt is commonly sold to a collection agency. The collection agency will then attempt to collect the debt from the consumer.
Warning
After a credit card account is charged off and sold to a collection agency, not only will the collection agency add a derogatory account to your credit report, it may also choose to file a lawsuit against you for the full balance of the debt.
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