A charge-off on a credit report means that a creditor has written off a debt as a loss because it believes the borrower will not repay it. This typically happens after the borrower has missed payments for about 120 to 180 days (roughly six months). Despite the charge-off, the borrower is still legally responsible for paying the debt
. Key points about a charge-off:
- It is a negative, derogatory entry on your credit report that indicates serious delinquency.
- The creditor stops trying to collect the debt themselves and writes it off as a loss for accounting and tax purposes.
- The debt may be sold to a collection agency, which will then attempt to collect it.
- The charge-off remains on your credit report for up to seven years from the date of the first missed payment that led to the charge-off.
- A charge-off severely damages your credit score and can make it harder to obtain new credit or loans at favorable terms.
- Even if you pay the charged-off debt, the mark stays on your credit report but may be noted as "paid charge-off," which some lenders view more favorably than unpaid charge-offs
In summary, a charge-off means the creditor has given up on collecting the debt themselves and has recorded it as a loss, but you still owe the money and it negatively impacts your credit history and score.
