How to Remove a Charge-Off from Your Credit Report

Seeing a charge-off on your credit report might be a little confusing if you’re unsure about what it means for you or what steps to take next. A charge-off is when a lender writes off a debt as a loss, meaning they don’t expect you to repay it anytime soon. But even if a debt is charged off, you’re still responsible for repaying it.

When a lender charges off your account, they report it to the credit bureaus. While you can’t remove an accurate charge-off from your credit report, you can dispute an incorrect one.

Let’s take a closer look at how a charge-off works, what to do if you get notified of one and tips to rebuild your credit afterward.

What is a charge-off?

A charge-off is a negative mark on a credit report that appears when a borrower fails to repay a loan or credit card balance, usually after 120-180 days of nonpayment. Lenders will try to contact the borrower by mail, phone or email to collect payment or work out a debt payment plan first.¹ When the lender alerts the three major credit bureaus (Experian, Equifax and TransUnion), a charge-off is placed on the borrower’s credit report.

What happens when a debt is charged off?

If you receive a charge-off notice, it doesn’t mean the debt goes away. The credit line may be closed, but you are still responsible for repaying the debt. A charge-off can also negatively impact your credit score, which may make it harder to get approved for loans or credit cards in the future.

After a debt is charged off, a lender may hire a debt collector to pursue the debt you owe. Debt collectors work to recover debt when the debts are past due. If a debt collector has acquired your debt or been hired to collect it, they’ll first notify you either by phone or in writing. By law, they must provide written notice called a debt validation letter within five days of their first attempt to contact you.

If you don’t repay, the creditor or debt collector may attempt to take legal action against you to try to collect the debt. If the court issues a judgment against you, and you still don’t repay the debt, the debt collector may request:

• Garnishment of your wages (take a portion of your paycheck)
• Placement of a lien (a legal claim) on your property
• Your bank to freeze funds up to the amount owed²

In many states, debt collection is subject to a statute of limitations — the amount of time that the debt can be collected through the court system. The average statute of limitation period lasts between three and six years, but it may last up to 10 years in some states.³ However, even if that time passes, debt collectors in some states may still contact you to collect payment.⁴

How long does a charge-off stay on your credit report?

A charged-off account stays on your credit report for up to seven years after the first missed or late payment.⁵ Paying the debt doesn’t remove a charged-off account from your credit report, but your credit report will show it as paid. After seven years, the charge-off should fall off your credit report, whether you’ve paid the debt or not.

What to do if you see a charge-off on your credit report

Your next steps depend on whether the charge-off is accurate or inaccurate. If a charge-off is legitimate, you can’t remove it, but you can work with the lender or debt collector to settle the debt. If a charge-off is inaccurate, you can dispute it and have it removed from your credit report.

Reach out to the lender or debt collector

If the charge-off is legitimate, reach out to the lender or debt collector to discuss your options. You may be able to negotiate a repayment plan or settle the debt for less than you owe. Once you’ve paid off or settled a charge-off debt, it will show as paid on your credit report. It’s important to note that settling a debt will impact your credit history and affect your taxes.⁸

Dispute credit report inaccuracies

From time to time, there may be mistakes in your credit report, so make sure to check that a charge-off is accurate. You can file a dispute if you’ve already paid off an account which has been charged off and it’s not showing as paid on your credit report. You can also file a dispute if other details are incorrect, like the due dates or account balance. Each credit bureau allows you to dispute credit report inaccuracies online, by phone or by mail. You may need to supply supporting documentation, such as receipts of bills you paid.⁶

When you dispute an error, the credit bureau generally has 30 days to investigate the dispute, and five days after the investigation is completed to inform you of the findings.⁷

How to dispute an inaccurate charge-off

If you find an inaccurate charge-off on your credit report, you can dispute it. Here’s the process:

1. Review your credit reports: You may check your credit report weekly for free at AnnualCreditReport.com. Make sure to check reports from all three bureaus.
2. Highlight errors: Each credit report may have different information. Review each report closely, and highlight any errors in balance, dates or account status.
3. File a dispute: You must file a dispute with the credit bureau that has the incorrect report. (That might be one, two or all three credit bureaus.) Each credit bureau allows you to dispute online, by phone or by mail. You’ll need to explain what is incorrect about the charge-off.
4. Provide supporting documentation: In your dispute, include any supporting documentation, such as paid receipts, to help prove the inaccuracy.
5. Monitor the status: Bureaus have 30 days to investigate a dispute, and you can see their progress by checking the reference number the bureau provides.
6. Be patient: If the charge-off is an error, as long as you provide documentation proving you’ve paid the debt, it should be removed and improve your credit score. A credit card issuer must resolve a legitimate dispute within 90 days.⁹

How to rebuild your credit after a charge-off

If you receive notice of a charge-off, don’t panic. Here are some actions you can take to start rebuilding your credit.

Pay down existing debts

Finding a debt repayment method that works for you can help you tackle your debt with confidence. Some common strategies include the debt snowball method, where you pay off your smallest debts first, and the debt avalanche method, where you pay off debts with the highest interest rates first.

Another strategy that can make paying off debt more manageable is a debt consolidation loan. A debt consolidation loan is a personal loan that allows you to turn multiple monthly payments into one, with a potentially lower interest rate or lower monthly payments. OneMain offers debt consolidation loans, working with a wide range of credit scores and taking your whole financial picture into account to help you find a loan that’s right for your situation.

Keep your credit utilization low

Your credit utilization ratio is the percentage of your available revolving credit that you use. You can calculate it by dividing your credit card balances by your total credit limits. It’s generally recommended to keep your credit utilization ratio below 30% to help improve your score.¹⁰ You can do this by being more selective of when you use your credit card to make purchases, making sure you pay off your statement balance each month and finding automatic charges that you can drop. If you’re a OneMain customer, you can use the free OneMain® MyMoney service to help you cut down on unused subscriptions.

Consider a credit-builder loan

A credit-builder loan is a personal loan designed specifically to help you improve your credit score. These loans work like a traditional loan, just in reverse. A lender approves you for a loan amount, but rather than receiving that amount right away, you work toward receiving it by making a monthly payment for a set period. Once you’ve made all the payments, the lender gives you the full loan amount. The record of on-time payments is reported to at least one credit bureau, which can help build your credit score.¹¹

Apply for a secured card

A secured credit card is similar to a traditional credit card but requires a cash deposit upfront, which is usually equal to your credit limit. Your deposit serves as collateral (something of value) that the lender can keep if you don’t make payments. Using your card responsibly by paying your bill on time and in full could help you rebuild your credit over time. Be sure to only charge what you can comfortably afford to repay to avoid falling behind and being charged late fees and additional interest.

Proactively monitor your credit

Keep an eye on your credit reports and credit score to see the results of your hard work. There are several ways to check your credit for free.

• AnnualCreditReport.com: You can check your credit report from each of the major bureaus once a week at AnnualCreditReport.com. (The website won’t show your credit score, but it’s a good way to look out for errors.)
• Credit card issuers: Many banks and credit unions that issue credit cards allow you to check your credit score for free.
• Banks and lenders: Similarly, banks and lenders often offer free credit score services. For instance, OneMain offers customers free access to their VantageScore credit score, which is updated monthly.
• Financial apps: Many personal finance apps are designed to help you save, but some also allow you to check your credit score as a service.

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Stay proactive about your credit health

A charge-off doesn’t have to define your credit future. You can dispute an inaccurate charge-off on your credit report, and if you see a legitimate charge-off, you can take steps to start rebuilding credit. Stay informed and know the options you have to help tackle your debt moving forward.

Sources

1, 5 https://www.experian.com/blogs/ask-experian/how-long-do-charge-offs-stay-on-your-credit-report/
2 https://www.consumerfinance.gov/ask-cfpb/what-should-i-do-if-im-sued-by-a-debt-collector-or-creditor-en-334/
3 https://www.bankrate.com/personal-finance/debt/statute-of-limitations-on-debt/
4 https://www.consumerfinance.gov/ask-cfpb/can-debt-collectors-collect-a-debt-thats-several-years-old-en-1423/
6, 7 https://www.bankrate.com/credit-cards/advice/how-long-before-credit-card-issuer-resolves-billing-error/
8 https://www.equifax.com/personal/education/credit/report/articles/-/learn/charge-offs-faq/
9 https://www.consumerfinance.gov/ask-cfpb/if-a-credit-reporting-error-is-corrected-how-long-will-it-take-before-i-find-out-the-results-en-1339/
10 https://www.nerdwallet.com/article/finance/30-percent-ideal-credit-utilization-ratio-rule
11 https://www.nerdwallet.com/article/loans/personal-loans/what-is-credit-builder-loan