How to Handle Charge Off Accounts

A charge-off is an accounting term that means an account is no longer considered a collectable asset and can no longer be added to a credit card company's balance sheet as a profit, but rather, a loss. It is a mechanism for getting rid of a debt because the borrower has not repaid the principal and interest.

The best way to handle a charge-off is to require the entry be changed on your credit reports to "paid as agreed" or "account closed, paid as agreed" upon payment of the old debt.

Instructions

1

Order copies of all three credit bureau reports. Revolving and installment credit lines are not necessarily reported to all three agencies. A consumer is allowed, by federal law, to obtain their credit report free of charge once a year from each of the three credit reporting agencies: Trans Union, Exquifax, and Experian.

Review each report to see which agency is reporting the charge-off.

2

Require verification the debt is actually yours. Negotiation of charge-offs should be approached as first requiring the debt be verified as accurate by the credit bureaus. This can be done by disputing the debt directly with each of the three credit agencies.

By law, the credit bureaus have 20 days to verify the debt or cease to report it if the cannot obtain verification. To use this provision to your advantage, dispute the charge-off just prior to the end of the year, during the holidays when the credit bureaus are at their busiest.

3

Obtain a written agreement. When negotiating payment or settlement of the charge-off, stipulate the settlement is only payable once a written agreement has been drafted and sent to you and contains a promise to change the entry to "paid as agreed" or "account closed, paid as agreed" and that nothing further is appended to the listing such as "90 days late" or "more than 90 days late."

Once in possession of the written agreement, send a money order or certified check to the collector or the account service (do not send a personal check as it contains your bank's routing number and your account number.)

4

Forward a copy of the agreement to each credit bureau. Along with a copy of the money order or certified check, send a copy of the written agreement to each of the three credit reporting agencies and be sure to follow up within 30 to 60 days via phone to guarantee they are in receipt of the agreement and are complying with the terms.