- advertisement -
The Debt Adviser

Getting rid of an old charge-off

Dear Debt Adviser:
I had a credit card charge-off, and I was not aware of this until recently. I don't know who to get in touch with to pay off this debt. It was an Express store credit card, and I can't remember who the debt was with after Express. I would appreciate any advice possible. Thank you.

Dear Amy:
You are correct that you need to pay off your charge-off. As you may have already found out, a charge-off is the No. 1 reason for being denied credit.

Creditors typically write off or charge off a debt if there has been no payment on the account for more than 180 days or six months. This does not, however, mean that the person no longer owes the debt. A charge-off is an accounting procedure for tax purposes used by the creditor where an uncollectable debt or charge-off is reported as a loss for the creditor.

The creditor can and often does attempt to collect the debt long after it has been charged off with either an in-house collection program or more commonly with a third-party debt collection service. Because the original contract for the debt, in your case a credit card agreement, was not honored, the account balance can be requested paid in full. Sometimes a creditor will accept a partial payment of the debt and the account will be reported as "settled charge-off."

- advertisement -

A charge-off is something you want to avoid because it is a red flag for potential lenders. Paying off the debt will not remove it from your credit report, but it will be updated to a "paid charge-off." To qualify for some loans, including a mortgage loan, you must take care of any charge-offs that appear on your credit report.

The charge-off will remain on your credit report for seven years plus 180 days from the date of the first nonpayment per the Fair Credit Reporting Act. For example, if you stopped paying on your credit card account in July 2000 the charge-off would be removed from your credit report in January 2008.

So what to do about your Express charge-off? I recommend you:

1. Contact the original creditor, Express, to determine if your account information is accessible and what company is collecting the debt. There is still a chance you can pay Express directly.

2. Find out the balance of your account, and let the creditor or collection agency know that you intend to repay the debt. Here is where you ask for terms that fit your budget. Suggest a number that you can afford. Don't promise to pay more than you can afford just because they ask you to.

3. Request that Express have the charge-off removed from your credit report if it is paid in full. You can also try to ask for it to be shown as "paid as agreed." If they want you back as a customer they might agree. In any event, get confirmation in writing that it will be removed before paying the debt.

4. Check your credit report with each of the three major credit bureaus -- Experian, Equifax and TransUnion -- to make sure the account has been updated to "paid charge-off" if Express is unwilling to have it removed.

5. If Express does not have your account information or knows who does, submit a statement of up to 100 words to each of the credit bureaus explaining that you have contacted the creditor in an attempt to take care of the debt but your account information was not available.

6. And finally, check your credit report annually for accuracy, and dispute any inaccurate information with the credit bureau supplying the report.

One last thing, the fact that you were not aware that you had a charge-off should be taken as a sign to keep better track of your bills, records and financial obligations. A good credit history is important, and you run the risk of damaging it further without proper organization.

The Debt Adviser, Steve Bucci, is the president of Consumer Credit Counseling Service of Southern New England. Visit CCCS for additional debt advice or click here to ask a debt question.

-- Posted: Dec. 16, 2002

Looking for more stories like this? We'll send them directly to you!
Bankrate.com's corrections policy
See Also
20 credit card tricks
Credit Scoring 101
Financial advice glossary
More Debt Adviser stories


30 yr fixed mtg 4.32%
48 month new car loan 2.91%
1 yr CD 0.68%

Mortgage calculator
See your FICO Score Range -- Free
How much money can you save in your 401(k) plan?
Which is better -- a rebate or special dealer financing?

Begin with personal finance fundamentals:
Auto Loans
Credit Cards
Debt Consolidation
Home Equity
Student Loans

Ask the experts  
Frugal $ense contest  
Form Letters

- advertisement -
top of page
- advertisement -