What Is a Charge-Off?
In plain English
A charge-off is an accounting action a lender takes when a borrower has not made payments for 120 to 180 days, at which point the lender declares the debt unlikely to be collected and writes it off as a loss. Despite the name, you still legally owe the debt. A charge-off is one of the most severe negative marks that can appear on a credit report.
What Happens After a Charge-Off?
After charging off the debt, the original lender may continue attempting to collect it, sell it to a third-party debt collection agency for pennies on the dollar, or hire a collection agency to collect on their behalf. You remain legally obligated to pay. The charged-off account and any resulting collection account both appear on your credit report, compounding the damage. The original charge-off stays for seven years from the first missed payment.
How Badly Does a Charge-Off Affect Your Credit Score?
A charge-off is one of the most damaging events for a credit score, often causing drops of 100–150 points or more depending on your starting score. It represents a complete failure to repay an obligation. The damage is severe and long-lasting — the mark remains for seven years. However, the impact does diminish over time, especially as you rebuild positive payment history in the years following the charge-off.
Should You Pay a Charged-Off Debt?
The financial and moral answer is yes — you owe the money. Whether to pay depends on your situation. Paying a charged-off debt updates its status but typically does not remove it from your report. Some newer scoring models (FICO 9, VantageScore 3.0+) ignore paid collections and charge-offs. Before paying, consider whether the statute of limitations on collection has expired, and get any payment agreements in writing before sending money.
Frequently asked questions
Is a charge-off the same as having debt forgiven?
No. A charge-off is an accounting classification for the lender — it does not mean you are off the hook. You still owe the debt and can be sued for it. If the lender forgives more than $600 in debt, they may send you a 1099-C form and you may owe taxes on the forgiven amount as income.
Can a charged-off account be removed from your credit report early?
Only if the information is inaccurate or unverifiable. You can dispute errors in the reported amount, dates, or account ownership. Accurate charge-offs cannot be legitimately removed before the seven-year reporting period ends. Goodwill deletion requests are occasionally successful with original creditors who still own the debt, but rare.
Keep exploring
Related terms
Debt Collection
Debt collection occurs when a lender or third-party agency attempts to recover unpaid debts. Collection accounts on your credit report can significantly damage your score for up to seven years.
Payment History
Payment history is a record of whether you have paid your credit accounts on time. It is the single most important factor in your credit score, accounting for 35% of your FICO score.
Late Payment
A late payment occurs when you miss a bill due date. Payments more than 30 days past due are reported to credit bureaus and can significantly damage your credit score.
Credit Report
A credit report is a detailed record of your borrowing and repayment history compiled by credit bureaus. It is the source data used to calculate your credit score.
Credit Score
A credit score is a three-digit number that summarizes your creditworthiness based on your credit history. Lenders use it to decide whether to approve loans and at what interest rate.
Credit Repair
Credit repair is the process of improving a damaged credit score by addressing errors, resolving negative marks, and building positive credit habits over time.