What is a Charge Off
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Charge Off
An account that has been delinquent for six months will usually be charged-off. You will still owe the debt it just is a very large negative mark on your credit. A charge-off makes the statement that the creditor no longer believes that you will pay your bill. The charge-off will remain on your credit report for seven years from the time the account became delinquent. This is a serious negative situation that you want to avoid.
Avoiding a charge off
There is a very simple act that will prevent all charge-offs. Pay the minimum due on time every time! If you let your account lapse for several months then it is in danger of being charged off. A charge-off is one of the worst things you can have happen to your credit. Take the time to plan so that you can make your payments as scheduled. Minimizing your debt will also contribute to avoiding a charge-off. The less debt you have the more financial wiggle room you have. Make a budget that includes a plan for getting caught up on your debt and continuing to get totally out of debt.
Get caught up
Getting caught up is harder than staying caught up. When you are late there are extra fees that start being applied. If you end up over the limit then there are even more fees applied. As hard as it may be to get caught up it is far more advisable than having a charge–off on your report. Call your creditor and work with them they may surprise you and be willing to decrease your minimum monthly payments for a short time to give you a chance to get your finances on track. Sell something, take an extra job or get some overtime to help you get control of the situation rapidly. The faster you pay things down the shorter the time you will have in a decreased available income situation. If you are stressed out over credit problems seek help. You can get professional help or take a class on financial management. Get an accountability partner that will help support you as you take control of your financial life.
Credit score
A charge-off is one of the worst loan statuses that you can have. This status will seriously drop your score. 35% of your credit score is related to payment history. Each month that you don’t pay your minimum balance is tracked on your credit report. The impact of a charge-off on your credit score will lessen over time. The connotation that a creditor had to write off the balance of a debt that you owed can affect how creditors, insurers, and prospective employers look at you.
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