When you become severely delinquent on a debt, a creditor may declare your debt as a charge-off. This negative notation will go onto your credit report, significantly affecting your credit score. Though a charge-off is assumed to be noncollectable, you are still expected to pay it. Failure to do so will keep your credit score lower than it could be.
Charge-off Details
A charge-off will include details such as any relevant dates (first delinquency, etc) and the amount of debt.
Lawsuits
If the charge-off is for a large amount (typically more than $1,500), a creditor may elect to file a lawsuit.
Paying Your Charge-Off
Paying a charge-off will not remove it from your credit report, though the report will reflect it as having been paid. Typically, a charge-off remains on your report for seven years.
Misconceptions
Some people incorrectly assume that making payments on a charge-off resets the clock, meaning that the charge-off will remain an additional seven years from the most recent payment. The seven-year time limit is based on the original delinquency date, regardless of any future payments.
Considerations
Prior to paying your charge-off, contact your creditor and request (in writing) that he remove it from your report (once paid). He doesn't have to comply, but it doesn't hurt to try. Keep records of your correspondence.
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