Business

How Do I Remove Charge-Offs From My Credit?

3 Mins read

No one wants to be in debt. Those final payment reminder letters sound so severe and terrifying. Despite their aggressive approach though, there are things you can do to help yourself. One of these, for example, is a pay for delete letter however, you do also have other options. 

What’s a Charge-Off? 

  • A term for when you miss several payments 
  • A declaration from creditors that it’s unlikely a loan will be paid
  • When creditors no longer try to collect the debt 
  • The debt is still owed 

First, what’s a charge-off and why does it matter? Essentially, if you keep missing payments on a service then at some point the provider will assume you can no longer pay. They might write off your payment, depending on their level of risk and the amount you owe. Clearly, this doesn’t happen very often. 

The most likely outcome of you not paying is that they will declare your debt uncollectible. This means that they will no longer follow up with you. Be warned though because they might decide to sell your debt to a more aggressive debt collector. Whatever happens, you still owe your debt unless you get to the stage that you need to declare bankruptcy. 

Filing for bankruptcy should be a last resort though because you can be sure that your credit report will be scarred for 10 years. However, even in those cases there are things you can do and companies to borrow from. In fact, whatever the problem, there is always some sort of solution although some are more pleasant than others. 

Removing Charge-Offs from Credit Reports 

  • Negotiate with lender 
  • Pay for Delete letter 
  • Wait for 7 year period to end 

Talking to your lenders is the first thing you can do to remove any charge-offs. This usually involves negotiating and offering something in return such as extra payments. You can leverage goodwill and many creditors are happy to be flexible if they get more money in return. 

Another option involves a pay for delete letter. This is very similar to talking to your lenders about what they might accept. The main difference is that this comes as a formal letter. It’s worth noting that you can follow this approach on your own with sample letters from the web. 

Last but not least, there is a 7 year period after which the charge-off is automatically removed from your credit report. You should also check the law in your state with regards how the debt might expire. In those cases, it might be worth getting further advice from a credit repair company. 

What is a Pay for Delete Letter? 

  • Negotiating letter 
  • Offering something for removal of charge-off
  • No guarantee 

A Pay for Delete letter is basically a negotiation tool where you offer to pay a creditor to remove negative information from your report. It doesn’t mean the information is wrong but it just won’t show up. Also, you still owe the debt unless you offer to pay it all off in one go, for example.

As you’d expect, creditors are under no obligation to comply with any Pay for Delete letter. Also, many credit report companies won’t even support the process because it’s a lot of work with little guarantee although it depends on your circumstances. There’s a slightly different approach supported by TransUnion, one of the credit bureaus, that supports highlighting positive points on your credit report. This seems to be more successful than a Pay for Delete letter although every case will be different. A credit report company can advise you but again, they cannot commit to any particular result on your credit score. 

Final Words on Removing Charge-Offs to Improve your Credit Score

The most successful approach for removing charge-offs is to dispute any errors because the credit bureaus are obliged to follow up on any disputes. Once you’ve completed this step then you can always negotiate or follow the Delete for Pay letter process. It’s completely legal under the Fair Credit Reporting Act but its results are under debate. In addition, you might find yourself having to pay off a large debt all at once. Assuming your charge-offs are due to your financial circumstances, rather than forgetfulness, then this might not be a viable option. 

Finally, if you’re in dire straits, you might want to talk to a credit repair company to help you with a long-term strategy. Yes you can wait for the 7 year period which will look different in each state for your charge-off to disappear from your report. However, this could include other consequences that you might need to understand. In the meantime, you can also follow an improved money management approach that a credit repair company can detail for you. In the long run, it’s all about the big picture and sustaining a healthy approach to managing your finances, tough as that might sound. The good news though is that there is a way out with time and patience.