Information on charge off account

Let us define several terms before we get to the central issue in your question.

Charge Off

Charge-off (sometimes called "write-off") is an accounting term used by creditors when they move a delinquent account from its accounts receivable books to its bad debt ledger. This usually occurs between 180 and 240 days from the date of the last payment. The fact that an account is charged-off does not mean the debt may not be collected later. The charge-off date also does not correspond to the statute of limitations on collecting a debt, or the date that an entry on a credit record must be removed. All three dates or deadlines are independent of each other and have different meanings.

Because an account is charged off does not mean the creditor lacks a legal right to collect the debt. To the contrary, the creditor may move the account to its own internal collections department, or sell the debt to a third-party collection agency.

Seven-year rule

Federal law (US Code Title 15, §1681c) controls the behavior of credit reporting agencies. This law is known as the Fair Credit Reporting Act (FCRA). Under FCRA §605 (a) and (b), an account in collection will appear on a consumer's credit report for 7.5 years. The clock starts approximately 180 days after the date of first delinquency on the account. To learn when an account will be removed by the credit reporting agencies (TransUnion, Equifax, and Experian and others), add 7.5 years to the date of first delinquency. Subsequent activity, such as resolving the debt, is irrelevant to the seven-year rule. However, if the debt is a tax lien, that can appear for seven years from the date of payment. A bankruptcy will appear for ten years from the date of the final order. Delinquent federal student loans can be reported indefinitely, i.e., for as long as they are delinquent.

Since the negative impact of delinquent accounts decreases with time, an account that is nearing the seven-year mark should only have slight impact on your credit history. However, if you do not have other positive items on your report to balance out the impact of the negative item, this old account could significantly lower your credit score. Therefore, when it falls off your report, your score could increase significantly. On the other hand, if you have many positive items, this old account is probably not lowering your credit score much, so when it falls off your report, your score may only improve by a few points.

Under the FCRA, all trade lines can be reported on each of the credit bureaus. However, the reporting agencies must update and keep accurate data in their credit files. If there is erroneous information (like a collection account, that you believe is inaccurate), you must notify them (typically through a certified letter) and then wait one reporting cycle (90 days) for the errors to be removed.

See the Federal Trade Commission document FTC Facts for Consumers: How to Dispute Credit Report Errors for more information.

Once they receive your dispute letter, the bureaus will forward the documents to the creditors in question so the creditors can either challenge the dispute or correct the inaccurate listing. If the creditors do not respond, as often happens with old accounts, the listings should be removed from your credit reports.

To read more about credit, credit reporting, and credit scoring, I encourage you to visit the Bills.com Credit Solutions and Resources page.

I hope that the information I have provided helps you Find. Learn. Save.

Best,

Bill

www.Bills.com