What is a charge off?
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Exactly what is a charge off? I have one on my report, and I’m not sure I completely understand everything that’s involved with it. Thank you in advance.
It’s an accounting term for uncollectable debts
A charge-off is an accounting term. Basically it means that your creditor has deemed your debt as uncollectable. In plain language, charging off an account is like saying: “we really don’t think we’re going to see a dime of this“. It doesn’t mean that they can’t try.
Usually, creditor will deem an account as “charged-off” after 180 days of delinquency. The account will be closed, written off and most likely sold to collection companies for cents on the dollar.
Charge-offs are particularly bad for your credit. Your account status will change to reflect this status, and your credit score may drop as much as 120 points. You may not be able to get new credit with an unresolved charge-off in your file.
The fact that your creditor has written off the account doesn’t mean that your debt is forgive. Your creditor (or a collection agency that bought your dent) may (and will) try to collect it. They may even file law suite against you, and have good chances of getting a judgment against you.
A more detailed explanation to what is a charge off can be found here: Charge-Offs and Credit Scores.
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