A charge-off is when a company reports an account to the Internal Revenue Service as a loss. Bad debts and uncollectible accounts are other names for charge-off accounts.
Considerations
Charge-off law dictates that companies must write accounts off as bad debts when there has not been a payment in 180 days.
Credit File
Once an account is charged off, it will remain on the credit file of the borrower for approximately seven years. If the account is paid off prior to the seven-year time frame, it still remains on the borrowers file, according to Card Report. A charge-off can decrease a borrowers chances of receiving future credit.
Collection Agency
Lenders will often forward their charge-off accounts to collection agencies for further collection activity. Collection agencies may start a series of phone calls and letters in an effort to collect the balance. The final result could be legal action.
0 comments:
Post a Comment