What Is a Charge-Off and How Does It Affect Your Credit?

"Charged off" is one of the most confusing phrases on a credit report. Many people assume it means the lender gave up and the debt is gone. It doesn't. A charge-off is an accounting step the lender takes. You still owe the money, and the account can seriously affect your credit score.

What a charge-off means

When a debt goes unpaid for about six months (credit cards are typically charged off after 180 days of nonpayment), the lender writes it off as a loss on its books. On your credit report, the account's status changes to "charged off." The lender may keep trying to collect, hire a collection agency, or sell the debt to a debt buyer.

Do you still owe a charged-off debt?

Yes. A charge-off doesn't cancel the debt. The original creditor or whoever buys the debt can continue collecting and, within the statute of limitations, may sue. If the debt is later settled for less than you owe, the forgiven amount may be treated as taxable income; the lender may send you a 1099-C.

How a charge-off looks on your report

A charged-off account often shows up in two places:

• The original account, marked charged off.
• A collection account from the agency or debt buyer that now holds the debt.

Both can appear, but only one should show a balance owed. If the original creditor sold the debt and still reports a balance while the collector reports one too, that's a duplicate that makes your debt look larger than it is, and it's worth disputing.

How charge-offs affect your credit score

A charge-off is one of the most serious negative items short of bankruptcy. It follows months of late payments, so by the time an account is charged off, your score has usually already dropped. The charge-off can be reported for seven years from the original delinquency date. Its impact lessens as it ages. See how long negative items stay on your credit report.

Your options for a charge-off

1. Review it for errors. Check the balance, dates, account status and whether it's reported twice with a balance. Dispute anything inaccurate.
2. Pay it in full. The status updates to "paid charge-off." This won't remove it, but lenders see it more favorably.
3. Settle it. Many creditors accept less than the full balance. Get the agreement in writing first.
4. Ask for deletion. Some creditors agree to delete or update the account as part of a settlement. It's not guaranteed, but it's worth asking before you pay.

Rebuilding after a charge-off

A charge-off doesn't lock you out of good credit forever. On-time payments on your current accounts, low credit card balances, and time are what bring your score back. Read our guide on handling late payments to keep new negatives off your report.

Get help reviewing charge-offs

Charge-offs are frequently reported with wrong balances, wrong dates or duplicate entries. Our team at 90 Day Credit Experts checks each one across all three bureaus. Start with a free credit assessment.

Frequently asked questions

Is a charge-off the same as debt forgiveness?

No. A charge-off is an accounting write-off by the lender. You still owe the debt unless it is settled or paid.

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

Up to seven years from the date of the original delinquency.

Will paying a charge-off remove it?

Paying usually updates the status to paid but doesn't remove it. Some creditors will agree to delete the account as part of a settlement, but they aren't required to.

Can a charge-off and a collection both be on my report?

Yes, but only one should show a balance. If both show a balance for the same debt, that's an error you can dispute.