How To Remove A Charge-Off From Your Credit Report

What happens if you simply stop making payments on a debt? In most cases, your creditor will eventually write off your debt as a lost cause. This is called a charge-off, and it can seriously hurt your credit score — and your opportunity for getting new credit in the future. Luckily, you can learn how to remove a charge-off from your credit report.

In this article, we’ll go over how a charge-off affects your credit score and how to request to remove it. We’ve also included templates of a sample letter to remove charge-off from credit report.

What is a charge-off?

If you stop paying a debt, your creditor might give up on trying to collect it. If so, they’ll decide the debt is uncollectable and write it off as a loss to the company. This is known as a charge-off.

Charge-offs can happen to any type of credit account, including:

Credit cards
Student loans
Auto loans
Personal loans
Personal lines of credit
Mortgages
Certain overdue medical bills

Most creditors don’t use a charge-off until you’ve missed payments for several months. You probably won’t have to worry about a charge-off if your payment’s late by a couple of days.

If you have missed payments for a few months, you’re probably wondering how to remove a charge-off from your credit report. Having a charge-off on your credit history can hurt your score for years to come.

Do you have to repay a charge-off?

Yes, you’re still expected to pay your debt — even if your creditor writes it off. A charge-off is not the same as debt forgiveness. Most lenders sell a charged-off debt to third-party collections agencies.

The collection agency will start contacting you to repay the debt. Debt collectors can be annoying, but they have to follow debt collection rules.

You can report debt collectors who don’t follow the laws to the Federal Trade Commission, Consumer Financial Protection Bureau, plus your state attorney general.

How does a charge-off impact your credit score?

When a company writes off your debt, they report it to the major credit bureaus. The charge-off is then added to your credit report. Having a charge-off on your report is one of the worst things to happen to your credit score.

It’s easy to see why. Paying on time is the biggest factor in your credit score. If you start missing payments, your score is going to take a hit.

But a charge-off won’t just make your credit score drop like a missed payment. Charge-offs stay on your credit history for up to seven years. Even if you make all of your other payments on time, potential lenders can see the charge-off.

You’ll find it harder to get approved for new credit like credit cards or a mortgage, so it’s important to know how to remove a charge-off from your credit report.

Paid versus unpaid charge-off

What happens if you pay back your charge-off amount in full? Does it still hurt your credit?

Unfortunately, paying off a charge-off doesn’t automatically remove it from your credit history. Lenders will still see a charge-off and may not want to lend you money.

However, a paid designation is added to your credit report if you pay what you owe in full. Some lenders may see a paid charge-off more favorably than an unpaid charge-off.

How to remove a charge-off from credit report

Lenders don’t have to remove a charge-off from your credit report, even if you pay them back. That being said, it’s still in your best interest to try and figure out how to remove a charge-off from your credit report. The worst that could happen is your request being denied.

The process of asking to remove a charge-off can also help you verify your debt. Lenders and collections agencies do make mistakes. Examining any charge-offs will help you determine if a debt is legitimate and accurate.

Disputing an inaccurate charge-off

If your credit report has an error, such as an inaccurate charge-off, you can report it. You need to write a letter disputing the error and send it to the major credit bureaus. You should also send a copy to the institution that supplied the inaccurate data, such as your bank or credit card company.

Be sure to collect any supporting documentation to go with your dispute letter. This could include statements, contract agreements, or letters from your lender. You need to make a strong case to show that the charge-off is inaccurate.

For example, say you pay off an overdue credit card balance in full before it goes to collections. Your credit card company sends out a letter to you acknowledging you paid the debt.

However, they also accidentally report your non-payment as a charge-off. You would include the letter from the credit card issuer as documentation of the inaccuracy.

Details of your charge-off can be inaccurate as well. That means you could still have a charge-off, but the amount could be wrong.

Let’s say you owe $1,000 on your car, but your lender reports a charge-off for $2,000. You can dispute the inaccurate amount.

Talking to your creditors

What can you do if the charge-off is accurate? Your first step is to talk to your creditors as soon as possible.

Check out your finances and decide how much you could realistically pay on your debt. The more you can pay as a lump sum, the better. A lender is much more likely to remove a charge-off if you can pay back what you owe in full.

Even if you can’t afford to pay your debt in full, your lender may be open to working with you. You could qualify for an income-based payment plan or other repayment programs.

Remember, it’s better to ask and be told no than it is to simply accept a charge-off on your credit history.

Tips to remove a charge-off

Figuring out how to remove a charge-off from your credit report doesn’t have to be complicated. Try these tips to help make the process easier and increase your chances of successfully removing a charge-off.

Find the details of the debt

Creditors often sell debt to collectors soon after reporting a charge-off. Collection agencies also buy and sell debt from other collectors. That means your debt could have been bought and sold several times after the charge-off.

Start by getting a free credit report to verify the details of your debt. You can ask for a free report from each of the three major credit bureaus once every 12 months.

The information you should look for includes:

Current creditor/owner of the debt
Amount you owe
Age of the debt

Negotiate the payment amount

Once you know who owns your debt and how much you owe, it’s time to start negotiating. There are usually three options for negotiating your payment amount:

Paying the debt in full
Partial lump sum payment
Installment payments/payment plan

Your creditor prefers that you pay the debt in full in one lump sum payment. However, many creditors would rather recoup some of their money than nothing at all. It’s possible they’ll work with you to set up a payment plan to agree to a lower lump sum.

When negotiating a lump sum payment for a partial amount, try starting your offer low. This gives you more room for negotiation so you’ll end up with a final amount that fits your budget.

For example, you can afford to pay up to 60% of your debt in one payment. You offer your creditor a lump sum settlement of 25%. They counter back with 75% and eventually agree to 50%.

If your debt has been sold, you’ll likely have a better chance of paying less than you owe. Most collectors buy debt for a fraction of the original cost. They can still make a profit even if you pay less than the actual amount owed.

Request a “pay for delete” agreement

Pay for delete agreements let you leverage payment for the money you owe to remove the charge-off. When learning how to remove a charge-off from your credit report, using a “pay for delete” agreement is extremely important.

In the agreement, you’ll offer to pay back all or part of your debt. In exchange, your creditor will agree to remove the charge-off from your credit report.

Note that your creditor has no obligation to approve your “pay for delete” agreement. Once they charge off the debt, there’s no guarantee they’ll agree to remove the charge-off.

However, as I mentioned before, it’s far better to ask if they’ll remove the charge-off than to not try at all.

Find the right person

Getting your pay for delete request into the right hands is essential to successfully remove a charge-off. An entry-level employee won’t be able to help you get the charge-off off of your report.

You also don’t want to send your charge-off removal letter to the generic correspondence address for your credit.

Instead, try to find a manager or executive-level employee who has the power to change your account status.

Get everything in writing

No matter what a creditor or collector says over the phone or in person, get your payment or removal agreement in writing.

Ideally, you’ll get the agreement on a copy of the company’s letterhead and signed by the manager or executive who agreed to it.

This protects you from the company backing out of the agreement. Don’t make any payments on your debt until you have the agreement in writing.

How to remove charge-off from credit report by contacting your creditors

The letter you send your creditor to remove your charge-off is called a “pay for delete” letter or a goodwill letter. Generally, you send a pay for delete letter if you haven’t paid the debt and a goodwill letter if you’ve already paid.

When wondering how to remove charge-off from credit report easily, a letter may be your best bet. How you construct your letter can make or break your chances of successfully removing a charge-off from your credit history. In addition to addressing your letter to the right person, remember these tips:

Use a clear, professional tone
Be polite
Avoid blaming the creditor or collector
Don’t make excuses
Keep it as direct as possible

Keep reading to see a sample letter to remove charge-off from credit report for paid and unpaid balances.

Sample letter to remove charge-off from credit report

If you still owe the money from your charge-off account, there’s some good news. Your repayment is the leverage you can use to help convince creditors to agree to a pay for delete arrangement.

Your removal letter should focus on the benefit to the creditor. That is, your lender will get all or some of their money back if they agree to remove the charge-off.

Pay-for-delete sample letter

[Date]

[Your name]

[Your address]

[Lender/collector’s name]

[Lender/collector’s company]

[Company address]

Re: Account Number [Your account number]

Dear [Lender/collector’s name or “Collection Manager” if unknown],

This letter is in reference to the alleged debt owed on the account listed above, [account number]. I wish to settle this debt, saving us both time and effort.

Please note that this letter is neither an acknowledgment that I owe the debt nor an acceptance of the debt. I retain the right to ask for verification of this debt and do not consent to make any payments unless I receive a written agreement to the terms below.

I’m willing to pay [this debt entirely (or) $X as settlement for this debt] in return for your agreement to remove the “charge-off” status of this account from all credit reporting agencies.

This payment is offered in exchange for your written and signed confirmation of the removal of this debt from all records of credit reporting agencies.

If you agree to these terms, please accept them in a letter written on your company’s letterhead. The letter should be signed by a representative with the authority to make this agreement. Once your approved agreement letter is received, I will send a payment for the debt in the amount of [$X].

The offer will be valid for 15 days from receipt, after which I will rescind it and request a full verification of the alleged debt.

I look forward to resolving this matter for our mutual benefit.

Sincerely,

[Sign your name]

[Print your name]

[Your address and contact information]

Sample goodwill letter to remove paid charge-off

If you’ve already paid the charge-off debt, you’ll want to try to remove it using a goodwill letter. Essentially, this letter acknowledges your missed payments and repayment and asks for forgiveness from the creditor.

Unlike a pay for delete letter, a goodwill letter doesn’t have the leverage of an unpaid account. Your creditor already has your payment, so there may be less incentive to remove the charge-off. However, with a bit of luck and politeness, you might be able to get your charge-off removed from your credit history.

Use this sample goodwill letter to remove paid charge-off to help you get started.

Goodwill removal sample letter

[Date]

[Your name]

[Your address]

[Lender/collector’s name]

[Lender/collector’s company]

[Company address]

Re: Account Number [Your account number]

Dear [Lender/collector’s name or “Collection Manager” if unknown],

Thank you for making the time to read my letter. This letter is in reference to [account ID/number], which was [paid in full/settled for $x/etc] on [date of payment or settlement].

I acknowledge that this payment was made after a previous non-payment on the account due to [quick description of your personal circumstances, such as losing a job or mistaking the due date]. As evidenced by my payment, I have made the effort to rectify my mistake.

I am currently trying to apply for a mortgage [change reason to best fit your situation]. The status of the above-referenced account is hindering my chances of approval.

I would like to request a goodwill adjustment to remove the charge-off status of this account reported to credit agencies. I believe this will significantly increase my approval odds for future credit.

Thank you for your time and consideration, and I look forward to hearing your response.

Sincerely,

[Sign your name]

[Print your name]

[Your address and contact information]

Start learning how to remove a charge-off from your credit report

While there’s no guarantee your creditor will remove a charge-off from your account, it’s always best to try.

If successful, you’ll avoid having a major negative credit event on your credit score for up to seven years.

Don’t wait for debt collectors to start calling — get your latest credit report and check that all of your debts are up to date and accurate today. And check out our free debt repayment course to help you succeed.

The post How To Remove A Charge-Off From Your Credit Report appeared first on Clever Girl Finance.

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