Jan
16
2013

Settled or charged off accounts in your credit report are “potentially negative”

 

Dear Experian,

If an account is paid off/closed, settled, or charged off, why would it still be showing as potentially negative? Is there any way to get these removed so they no longer affect me negatively?

- JNG

 

Dear JNG,

 

Experience has shown that consumers who do not repay an account as agreed are more likely to repeat that behavior. So, even when accounts are closed, the history of how they were managed is still relevant.

When you settle an account, it means that the creditor is agreeing to accept a payoff amount that is less than the amount originally owed. Because the creditor is taking a loss, a status of settled is considered potentially negative, though it is better than if the debt was not paid at all.

An account that shows charged off indicates that the creditor was forced to write the debt off as a loss to their company due to serious delinquency on the account. Anytime you fail to make payments on a debt that you owe, it is considered negative.

Although the account will show if the debt was paid, the fact that the account was charged off prior to when it was paid remains as part of the credit report for seven years from the initial payment that led up to the charged off status, called the original delinquency date.

As long as the late payment information is part of your credit history it could be viewed negatively by lenders, so, it is listed as “potentially negative” in your credit report.

The further in the past the negative information occurred, the less impact it will have on credit scores and lending decisions. However, you cannot remove accurate, negative information from the credit report before the specified reporting timeframes have expired.

Thanks for asking.

The “Ask Experian” team

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