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what is a CHARGE OFF?

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A charge-off is when the debtee (the company you owe money to) gives up trying to collect on your debt. Normal business doesn't work like the IRS, which will chase you to the ends of the earth to get what you owe. No business will pursue you forever, because every call they make, every letter they send, every lawyer and collections agency they retain costs them money. At some point they say, "This person is never going to pay this debt, and we don't want to waste any more time and money trying to collect it, so let's forget about it and move on." They write off your bad debt as uncollectable (i.e., a "toxic asset"), and a charge-off appears on your credit report.

The good news is, the debtee and/or their collections agents will no longer try to collect on your bad debt. The bad news is, this is one of the WORST things you can do to your credit, almost as bad as a bankruptcy or foreclosure. Charge-offs, bankruptcies, and foreclosures are all tools used by business to clear their books of uncollectable debts, and they all send prospective lenders the same message: "Watch out for this person! If you lend them money, they may not pay you back!"

Charge-offs do eventually drop off your credit report. I'm not sure if they stay on 2 years or 7 years, so maybe someone else can answer that. The best way to get rid of one, though, is to contact the lender and make payment arrangements. They may or may not still be willing to talk to you, so some persistance and negotiation may be necessary, but bottom line, if you make an honest effort to pay your debt, most companies will try to work something out. It's always better to make a deal BEFORE a charge-off happens, but it never hurts to try. If you do succeed in negotiating a payment plan, stick to it religiously! Once you have paid off your debt according to your agreement, one of two things can happen: 1) The debtee (the company) contacts the credit bureaus and has the charge-off removed from your reports, or, more likely, 2) YOU contact the credit bureaus yourself with proof of payment, and they will confirm with the debtee that the debt is paid and remove the charge-off.

I hope this answered your question.

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