Monthly Payments on a Charged Off Account, & Credit Report

First, I would like to clarify with you the definition of a charge off. Second, I will talk about what this means for your credit report, and what you need to do if you believe there is an error in reporting of your account.

Charge off

“Charge off” is an accounting term used by creditors, meaning that a creditor has transferred an account from its “accounts receivable” books to its “bad debt” ledger; credit issuers are required to do this by the Federal Office of the Comptroller of Currency, in an attempt to prevent banks from inflating future earnings statements with old and defaulted accounts. For the consumer, the only real consequence of an account charging off is that the account will report as a negative item on the consumer’s credit reports; it does not mean that the consumer no longer owes the debt. Despite what it sounds like, an account being charged off does not forgive the consumer for liability for the debt in question. Creditors can continue their collection efforts to secure payment on charged off accounts.

Charge Off, Credit Reports, and How to Dispute Credit Report Errors

When an account is in a charge off status it is no longer reported the same way prior to the charge off. Charged off accounts, or accounts that appear as collections, on a credit report are not required to report monthly payments to the credit reporting agencies. This is now bad debt on a credit report, and only when the account has been settled will it report as the balance as paid. After the account has been paid it will take up to seven years before it is removed from your credit report.

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 7½ 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 7½ 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.

If you believe that this is an error and would like to dispute this see the Federal Trade Commission document FTC Facts for Consumers: How to Dispute Credit Report Errors for more information.

If you are having debt trouble visit the Bills.com debt relief saving center to get no-cost, no-obligation quotes from pre-screened debt settlement service providers.

If your home mortgage loan is the account that is in a charge off status I encourage you to read Advice on Second Mortgage in Charge Off Status. You may be at risk of having your home foreclosed.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com