Can a Paid Charge Off Be Removed From Credit Report?

If you’ve had an account that has been charged off, you might be wondering whether paying a charged off account will remove the charge off from your credit report? We will answer this question in much detail below.

Can a Paid Charge Off Be Removed From Your Credit Report?

A paid charged-off account entry cannot be removed from your credit report even if the charge off is paid. A charge-off will remain on your credit report for seven years from the data that you first became delinquent on your account. The only way to remove the charge off is to prove that the charge off does not belong to you or there was an error in the charge off, which is often very difficult to do.

Creditors usually charge off accounts after the account has been delinquent for 180 days or more. Delinquency is a term of art that refers to the payments required on an account. So, if more than six months pass without any timely payments on an account, the account is charged off and a charge off notation is added to the account, indicating that the account has not been paid as originally agreed upon.

Before an account is charged off, 30 days, 60 days, 90 days, 120 days, and 180 days late notations will appear on the account, moving the account from the accounts in good standing section of your credit report to the negative accounts section on your credit report. Also, the outstanding debt will appear on your credit report. Creditors often choose to charge off accounts after they have been 180 days late. If this occurs the account will appear as charged off, indicating the outstanding debt that has been charged off.

If your credit decides to sell your debt to a collection agency, which is often the case, the outstanding amount will turn to $0 and the collection agency will then take over the account, and attempt to collect the outstanding amount from you. Even if a charged-off account is sold to a collections agency and the balance is set at $0, the charged-off account will remain on your credit report for seven years from the date that you first became delinquent on your account.

For example, if you became delinquent on your account on January 1st, 2022, and the account was charged off on July 1st, 2022, the charge off will remain on your credit report until January 1st, 2029. After the charge off has been added to your credit report, it will automatically be removed from your credit report without you having to do anything to remove it. That said, a charge off has a significant negative impact on your credit score because it shows future creditors and lenders that you were unable to pay off your account as originally agreed upon, making you a risky person to lend money to.

Furthermore, just because your debt is charged off does not mean that you’re no longer liable for paying back the money, you are still on the hook and have a legal obligation to repay the outstanding debt.

If the charged-off account has not been sold to a collection agency, you still have the option to pay back the money to the original creditor. If you repay the charged-off account, the notation on your account will be changed from charged-off to paid charge off. Unfortunately, paid and unpaid charge offs have the same impact on your credit score. So, when comes to your credit score, there is no benefit associated with paying a charged-off account. That said, lenders often view paid charged offs as less negative than outstanding charge offs.

Collection Account After a Charge Off

Typically, creditors and lenders sell the outstanding debt associated with charged-off accounts to collections agencies. Collection agencies will then aggressively attempt to collect the outstanding debt from you.

Usually, when attempting to collect the debt, collection agencies will add a collection account to your credit report in the amount of the outstanding debt. Collection accounts will add further damage to your credit as they will appear on your credit report under the collection accounts section of your credit report.

After your debt is sold to a third party collections agency, the charge off account will appear with a $0 balance as the collection agency has taken over the outstanding debt.

Collection agencies are extremely aggressive in the debt collection efforts, and they will bombard you with letters and phone calls several times a day, attempting to collect the outstanding debt that is now owed to them.

How Does a Charge Off Affect Your Credit Score?

A charge off negatively affects your credit score. That said, before a charge off is added to your credit report, you probably had 30 day, 60 day, 90 day, 120 day, and 180 day late payment marks added to your credit report, so it’s likely that your credit already sustained significant damage. When a charge off is added to your credit report, your credit score will further suffer because charges off are negative marks. The exact number of points that your credit score will drop is different from one person to another and depends on what else is in your credit report.

The higher your credit score, the bigger the drop you will experience as a result of a charge off being added to your credit report. The best thing that you can do for your credit is to avoid negative marks altogether. However, in the event that a negative mark such as charge off is added to your credit report, you should try to avoid further negative items from appearing on your credit report by making all of your payments on time. If you are suffering financial difficulties, contact your lenders and ask them about your payment options.

Should You Pay a Charge Off?

If you want to pay a charge off to improve your credit score, you should be aware that both a paid and unpaid charge off have the same negative impact on your credit score. However, keep in mind that you are legally obligated to pay off your outstanding debts. When future lenders and creditors look at your credit report, they will view paid off charge offs as more favorable than unpaid charge offs, so from that perspective, it does make sense to pay off a charge off. That said, charge offs are highly negative marks that are added to a person’s credit report, oftentimes, many lenders will refuse to lend you money if a charge off appears on your credit report. That said, a paid charge off looks better on your credit report than an unpaid one.

How to Remove a Charge Off From Your Credit Report?

A valid charge off that contains no errors cannot be removed from your credit report. You must wait for seven years for a valid charge off to be automatically removed from your credit report. That said, if you have a charge-off that does not belong to you or contains any errors, you can have the charge off removed by filing a dispute with the credit reporting bureau reporting the chargeoff.

For example, if a charge off appears on your Transunion credit report, and the charge off does not belong to you or there is some error in the charge off, you should file a dispute with Transunion to have the charge off removed. If the invalid charge off appears on more than one credit report, you must file a dispute with every credit bureau reporting the inaccurate information.

Disputes can be filed online with every credit reporting bureau. For example, you can file a dispute online with Experian, Transunion, and Equifax. Also, you can call them and file the dispute over the phone or by mail. However, the quickest way to file your dispute is to do so online by visiting each of the credit reporting bureaus and filing the dispute.

How to Avoid Having a Charge Off Added to Your Credit Report?

Oftentimes, when people find themselves in a financial crunch, unable to make payments on a credit card, they believe that ignoring the debt will make the problem disappear. However, ignoring a delinquent or soon to be delinquent account is the worst thing that you can for your credit. As cringeworthy as it may seem, you’re better off contacting your creditor and lender, explaining your situation to them, and asking them for assistance. Some creditors or lenders will offer you the ability to pay down the balance in small chunks. This is a much better alternative to having your lender charge off your debt and report the negative information to the credit reporting bureaus. Reaching a compromise with your lender or creditor is the best thing you can do to save your credit from the damage that’s caused by having late payments and charge-offs reported to the credit reporting bureaus.

Frequently Asked Questions (FAQs)

1. Should I pay off a charged off account?

If you want to improve your credit score after a charge off has been added to your credit report, you should know that paying a charge off will not improve it. Paying a charge off will not remove it from your credit report, instead the charge off will go from charged off to charged off paid. Although your credit score will not improve, having a paid charge off on your credit report is better than an unpaid charge off because lenders view paid charge offs more favorable than unpaid charge offs.

2. How long does it take to have a charge off removed from my credit report?

A charge off will be automatically removed from your credit report within 7 years of you first becoming delinquent on your account. After 7 years, the charge off will automatically be removed from your credit report.

3. Does a charge off affect credit score?

Yes, a charge off will affect your credit score. In fact, a charge off is one of the most negative marks that can be added to your credit report. Even a charge off that’s paid in full will have a negative impact on your credit score.

4. What happens when a charge off is removed from your credit report?

You will notice a significant improvement in your credit score once a charge-off is removed from your credit report. Just make sure to keep all of your other accounts in good standing and you should notice a decent improvement to your credit score. A charge off will have the most negative impact on your credit score when it’s first added. As the charge off ages, its impact on your credit score will begin to lessen until it’s ultimately removed from your credit report.

5. Can you dispute a charge off on your credit report?

Yes, you can dispute a charge off on your credit report, however, the credit reporting bureaus will not remove it unless there is an error in the information report or the charge off does not belong to you. However, a valid charge off cannot be removed from your credit report. It will remain on your credit report for seven years from the date you first missed a payment on your account. After 7 years, the charge off will automatically be removed from your credit report.