If you have a credit card you have not paid for a while, your credit-card company will write off the account as uncollectible. The amount of time that passes before the account is written off can vary from company to company. After the account is written off, the account is sent to a collection agency for further collection activity and sometimes legal action.
Time Frame
Most companies will write off your credit-card account as a bad-debt uncollectible item after six months without a payment. They have determined that this account is no longer an income-earning asset.
Features
When an account is written off as bad debt, the credit-card company will report this information on your credit file. The credit rating you receive is an "R-9." The "R" stands for "revolving" and the 9 is the charge-off rating code.
Benefits
Credit-card companies will show your bad debt account as a loss, and they will receive a tax break for it. Consumers are still obligated to pay these accounts.
Considerations
Accounts that have been written off will stay on your credit file for seven years. After that time has passed, the credit-reporting agency has to delete the account from your credit file.
Significance
If your account is in near the charge-off, stage credit-card companies will contact you by phone and mail to let you know a payment is needed.
Warning
If you have a write-off account, it can lower your credit score. A low credit score can cause other creditors to deny your request for credit or charge you a higher interest rate.
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