Home Members Tools Credit Cards
   

  • What Happens When a Credit Card is Charged-Off

    A credit card charge-off is the worst credit card status you can have. Thatís why you should avoid letting your credit card get that delinquent, if you can help it.

    How Charge-Off Happens

    Youíll have plenty of warning before your account gets charged-off. Each month that youíre delinquent the credit card issuer will contact you via phone, mail, or even email to let you know that your account is seriously delinquent and in danger of default. At first, they may only include a notice in your billing statement. But, after a couple of missed payments, theyíll start sending separate letters and making phone calls to get you caught up on your balance.

    Unfortunately, the further you get behind on your payments, the harder it is to catch up because of compounding late fees and interest. Imagine trying to stop a snowball. Itís easier to catch it when it first starts rolling, but it gets harder as the ball rolls further down the slope.

    After your credit card payment is 180 days, or six months, past due, the creditor will charge it off. A charge-off is when the creditor writes off the account as uncollectible. They report the account as a loss on their accounting statements, but they donít let you off the hook for the debt.

    Charge-offs may be referred to the creditorís collections department for further collection effort or they may be assigned or sold to a third-party collection agency. Your creditor may stop contacting you completely, but donít be surprised if collection calls resume months or even years after the debtís been charged-off.

    The Result of a Charge-Off

    A charge-off might make it hard to get approved for new credit cards, loans, even apartment rentals. Your insurance rate may increase. And, the charge-off could even cost you a new job or promotion at your current job.

    Like most other negative types of information, a charge-off will stay on your credit report for seven years from the date the account was charged off. However, if the charge-off is inaccurate, you can use the credit report dispute process to have the error removed from your credit report.

    Paying a Charged-Off Balance

    Paying the charge-off in full is usually the best option, but it doesnít necessarily erase the negative entry from your credit report. It does help, in the sense that a $0 balance is better than an outstanding balance, but youíll still suffer the damage of having the charge-off to begin with.

    Some creditors may be willing to entertain a pay for delete negotiation where you offer payment in exchange for having the account removed from your credit report. But, remember that creditors have the right and contractual obligation to report accurate information to the credit bureaus. So, they may turn down your pay for delete request.

    An alternative to paying the account in full is to settle the charge-off balance by getting the creditor to agree to accept part of the balance and cancel the rest. While the balance will be reported as $0 on your credit report, it will also be reported as settled, something that might be unfavorable to future creditors. But again, a $0 balance is better than any other type of balance.

    The other potential downside to settling is that you will owe taxes on the amount thatís settled. The IRS requires creditors to report any cancelled debts over $600. Claiming an insolvency exemption (if you had a negative net worth when the debt was cancelled) will help you eliminate the tax liability of settling a charge-off.

    Whether you pay in full or settle the account, taking care of the charged-off balance is best. Even though the charge-off will remain on your credit report for seven years, it will hurt your credit less as the charge-off gets older and as you pay all your other accounts on time.
  • Disclaimer

    Information in these articles is brought to you by Finance Globe. Banks, issuers, credit card, and other companies mentioned in the articles do not endorse or guarantee, and are not responsible for, the contents of the articles and is further subject to our terms and conditions.
  • Recent Forum Posts

    EdwardS

    Re: Sam's Club Discover card

    They do still offer the discover card.

    EdwardS July 29th, 2014, 09:56 AM Go to last post
    bocald99

    Re: Report Your "Credit limit Increases" Here!

    Capital One Quicksilver CLI from 500 to 750 auto increase. If this card didn't have the age that it does, I would have fired Cap One already. This card

    bocald99 July 27th, 2014, 11:53 AM Go to last post
    jemannie

    Re: Report Your "Credit limit Increases" Here!

    I have 2 Capital One Platinum cards. Both approved for CLI of $500 to $1500 each. CLI was requested by me online.

    jemannie July 25th, 2014, 02:32 PM Go to last post
    XB2013

    Re: Report Your "Credit limit Increases" Here!

    Ch7 Dis 02/13...

    Cap1= 02/13-$300..09/13-$500..04/14-$2000
    Cfna = 04/13-$900..10/13-$1200..04/14-$2000
    Wlmt= 02/13-denied..06/13-denied..03/14-$900(sp)..06/14-$1700(before

    XB2013 July 25th, 2014, 12:22 PM Go to last post
  • Recent Headlines and Articles

    ChrisB

    Tips to Rebuild Credit after Bankruptcy

    Have you recently filed for bankruptcy? It does not matter if you chose to do so through Chapter 7 or Chapter 13, this will have both a positive and negative impact on your finances at the same time.

    Once... read more
    ChrisB July 31st, 2014, 06:44 AM
    ChrisB

    When it makes Sense to Cancel your Credit Card

    A credit card that treated you well in the past may not do the same for you in the future. Despite the fact that you may not want to make the move, there are times when it is a good idea to cancel... read more
    ChrisB July 30th, 2014, 07:50 AM
    ChrisB

    Donít let these Self Employment Questions Stop you

    If you find yourself seriously considering self employment, you will soon realize that there are many questions to answer. While some are sure to be more challenging than others, none should stop you dead in your tracks.... read more
    ChrisB July 28th, 2014, 07:50 AM
    ChrisB

    How to Buy a Reliable Used Car, Not a Lemon

    Many people shy away from buying a used car because they are afraid of what they will end up with. While there may be a few lemons out there, if you take the right approach you know you can save... read more
    ChrisB July 25th, 2014, 08:37 AM
    ChrisB

    Does Vacation have to Cost that Much?

    As summer wears on and you begin to dream of days spent on the beach, it may not be long before you are planning a trip. While a vacation may be something you want, it may not be something you can afford.... read more
    ChrisB July 24th, 2014, 07:46 AM
    ChrisB

    What to do with your Credit Card Debt

    What do you see when you look at your credit card statement? While there is nothing better than a ď0Ē next to your balance, for many people this is not realistic at the present time. Instead, they realize they have some... read more
    ChrisB July 22nd, 2014, 07:57 AM
    ChrisB

    Reasons to Use LinkedIn to Find your Next Job

    Like some, you may be out of work and willing to take on any job. Or much the same as others, you could find yourself looking to make a change to a career that better suits your skills.

    While... read more
    ChrisB July 21st, 2014, 08:04 AM
    ChrisB

    Benefits of Renting out of College

    As a new college graduate, the world is at your fingertips. It will not be long before you are taking your first step into the working world, realizing that your future is bright.

    One of the... read more
    ChrisB July 18th, 2014, 07:59 AM

 

 

 

Credit Cards | Finance Social Network | Credit Card Reviews | Markets
About Us | FG on the Web | Sitemap | Privacy | Terms | Contact


Copyright © 2014 Finance Globe. All rights reserved.