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Guides

(From Credit Experts) How To “Remove Charge-Offs” Yourself

Mike Randall 5/22/17

A charge-off is one of the most harmful credit report entries, short of a bankruptcy. In fact, charge-offs remain on your credit report for at least seven years from the date they’re recorded — just like a bankruptcy. That’s because a charge-off is essentially a debt the creditor has recorded as “uncollectible” with the credit rating agencies.

So what can you do if this has happened to you?

Use Credit Repair Services or Do-It-Yourself (View sample “Pay for Delete” letter).

Option #1: Let the Credit Experts Handle It for You

While it is possible to remove charge-offs from your credit report, many people prefer to have a credit repair company handle this delicate process on their behalf.

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Option #2: Contact the Creditor in Writing (or By Phone)

One of the best and most effective ways to remove a charge-off yourself is to communicate directly with the original creditor, not with a collection agency or other third-party settlement firm. The reason for this is it’s the original creditor who reported the charge-off to the credit bureaus and who can ultimately remove it.

Your Goal is to Accomplish 1 of 3 Things:

You’ll want to contact the creditor in writing if possible, with a proposal for paying the debt in full. In writing to the creditor, you are trying to ensure at least one of the three following things happen:

1. Charge-Off Status Removed From Your Credit Report

This is the best-case scenario and what you are hoping they will agree to.

2. Charge-Off Status Changed to “Paid” or “Closed”

This is the most common case scenario and your best alternative to removal.

3. Charge-off Changed to a “Settled” Status

This is the least preferred solution because the term “settled” is often seen as being paid in collection.

Sample “Pay for Delete” Letter

This is a sample letter you’re free to copy and paste that tells the collection manager you wish to have the charge-off removed in return for payment.

Your name
Your address
Complete account numberAttn: Collection Manager,This letter is in reference to a debt claimed under the account number listed above. I wish to settle this debt in full without prejudice, in return for removal of the “charge-off” status with the credit rating agencies. This is not an admission of the debt or a payment agreement, unless you agree to have all information related to this debt removed from my credit file. In return for your removal agreement, I am willing to make payment in the full amount of $XXX.XX to be sent by certified funds. If this is acceptable, please acknowledge the details of this agreement in a letter written on your company’s letterhead. You will also agree to contact the collection agency to inform them of dismissal of the aforementioned debt.In addition, please be aware that as per my rights under the Fair Debt Collection Practices Act, I have a right to request full verification of this debt and to dispute it unless full verification is made. This offer is valid for 14 days from the date of receipt, after which it will be withdrawn and I will exercise my right to full verification.

Sincerely,
Your Name

Important: Get the Agreement in Writing Before Paying

You can also begin this process over the phone, if you’re lucky (or tenacious) enough to find the right department and person to talk to. In any case, be sure to get any settlement you make with the creditor in writing before making a payment.

One thing to be especially cautious about is paying any amount toward a charged-off debt without first getting a signed agreement with the original creditor. Doing so can reset the clock on your charge-off, meaning it will be another seven years from the date you make the payment before the entry is removed from your credit report.

If the Creditor Won’t Budge, Your Score Won’t Improve

It’s important to note if the creditor does not agree to remove the charge-off, paying the debt will not immediately improve your score. A “paid” or “settled” status does not change the fact that it’s still a charge-off on your credit report. Your score will improve gradually with time if you choose to pay, but it will not have the same effect it would if the charge-off was completely removed.

At this point, it’s up to you to decide if paying the debt is worth it.

About Mike Randall
Mike Randall is most knowledgeable in the areas of credit scores and credit cards, having written on those topics and others for the past eight years. He graduated from California State University with a degree in English literature, and he has an extensive background in personal finance studies. When he's not keeping BadCredit.org readers informed of changes in the subprime market, Mike’s hobbies include sailing and gourmet cooking. Connect with Mike on Google+.
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