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Getting rid of an old charge-off
Dear Debt Adviser:
I had a credit card charge-off, and I was not aware of this until
recently. I don't know who to get in touch with to pay off this
debt. It was an Express store credit card, and I can't remember
who the debt was with after Express. I would appreciate any advice
possible. Thank you.
Amy
Dear Amy:
You are correct that you need to pay off your charge-off. As you
may have already found out, a charge-off is the No. 1 reason for
being denied credit.
Creditors typically write off or charge off a debt
if there has been no payment on the account for more than 180 days
or six months. This does not, however, mean that the person no longer
owes the debt. A charge-off is an accounting procedure for tax purposes
used by the creditor where an uncollectable debt or charge-off is
reported as a loss for the creditor.
The creditor can and often does attempt to collect
the debt long after it has been charged off with either an in-house
collection program or more commonly with a third-party debt collection
service. Because the original contract for the debt, in your case
a credit card agreement, was not honored, the account balance can
be requested paid in full. Sometimes a creditor will accept a partial
payment of the debt and the account will be reported as "settled
charge-off."
A charge-off is something you want to avoid because
it is a red flag for potential lenders. Paying off the debt will
not remove it from your credit report, but it will be updated to
a "paid charge-off." To qualify for some loans, including
a mortgage loan, you must take care of any charge-offs that appear
on your credit report.
The charge-off will remain on your credit report for
seven years plus 180 days from the date of the first nonpayment
per the Fair Credit Reporting Act. For example, if you stopped paying
on your credit card account in July 2000 the charge-off would be
removed from your credit report in January 2008.
So what to do about your Express charge-off? I recommend
you:
1. Contact the original creditor, Express,
to determine if your account information is accessible and what
company is collecting the debt. There is still a chance you can
pay Express directly.
2. Find out the balance of your account,
and let the creditor or collection agency know that you intend
to repay the debt. Here is where you ask for terms that fit your
budget. Suggest a number that you can afford. Don't promise to
pay more than you can afford just because they ask you to.
3. Request that Express have the charge-off
removed from your credit report if it is paid in full. You can
also try to ask for it to be shown as "paid as agreed."
If they want you back as a customer they might agree. In any event,
get confirmation in writing that it will be removed before paying
the debt.
4. Check your credit report with each of
the three major credit bureaus -- Experian, Equifax and TransUnion
-- to make sure the account has been updated to "paid charge-off"
if Express is unwilling to have it removed.
5. If Express does not have your account
information or knows who does, submit a statement of up to 100
words to each of the credit bureaus explaining that you have contacted
the creditor in an attempt to take care of the debt but your account
information was not available.
6. And finally, check your credit report
annually for accuracy, and dispute any inaccurate information
with the credit bureau supplying the report.
One last thing, the fact that you were not aware that
you had a charge-off should be taken as a sign to keep better track
of your bills, records and financial obligations. A good credit
history is important, and you run the risk of damaging it further
without proper organization.
The Debt Adviser, Steve Bucci,
is the president of Consumer Credit Counseling Service of Southern
New England. Visit CCCS
for additional debt
advice or click
here to ask a debt question.
-- Posted: Dec. 16, 2002
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