Charge Off

What is a charge off and collections and how long can they stay on your account?

The term "charge-off" describes the status of an account when it has become severely delinquent. The lender has determined it will not receive payment and writes the amount off as a loss to the company. A "charge off" will affect your credit history negatively because it shows you did not repay the debt as agreed.

In most cases, creditors will transfer or sell the unpaid debt to a collection company. The collection company then becomes the legal owner of that debt, and they can attempt to collect that debt from you. If the collection company reports to Experian, the collection account will be added to your credit report.

Both the original account and the collection account may appear on your credit report. Once the debt is sold, the original account will show a status of "transferred" and may list the name of the collection agency it was transferred or sold to. The collection account will list the name of the original creditor that the debt was purchased or transferred from.

Both the charged off account and the collection account will stay on the report for seven years from the original delinquency date of the original debt. The original delinquency date is the date the account first became late and after which was never again current.

Although paying a collection account will not automatically remove it from the credit report, a paid collection is generally viewed more favorably than an unpaid one. Some of the newer credit scoring models exclude paid collections when calculating your credit score. So, paying off a collection account could result in credit score improvement as soon as the payment is reported to Experian.

Check out the scope to hear answers to all the questions asked.

Do you have questions about credit?

Join our live video chat every Tuesday and Thursday at 3:00 p.m. ET on Periscope. Rod Griffin, Director of Public Education at Experian, is available to answer your questions live.
Scoped on: 4/17/2018

Sign up for helpful tips, special offers and more!
You're signed up!
Our system is undergoing maintenance and will be available again soon.