I was with you right up until you asked how you could get your credit score back up. In your case this is the wrong question on which to focus. You could lose your home if your second mortgage holder decides to foreclose -- and that is more important than your credit score!
To answer your first question, when your lender states the loan has been "charged off," it means the lender has decided you are unlikely to pay what you owe. The amount you owe is no longer considered an asset but is instead charged off on the lender's books as an uncollectible debt. This action by your lender in no way means you no longer owe the debt. Charging off the debt is an accounting move on the part of your mortgage lender that does not change your obligation to pay what is owed. What may have changed, depending on the terms in your mortgage contract, is the interest rate being assessed on the loan. It may well have increased substantially once you defaulted on the mortgage loan. And the interest is still being added to the amount owed each month.
Even though your lender has charged off the loan, they may still foreclose on your home. Whether you have enough equity in the home to satisfy the loan with a forced sale after foreclosure may or may not be a determining factor for your lender in a foreclosure decision. What I recommend is you simplify the mortgage modification process by contacting HOPE NOW via their website or at (888) 995-HOPE. These nonprofit counselors are approved by the Department of Housing and Urban Development, and they get people modifications every day. They know who to call, what is required and have special contacts in most mortgage service organizations. Plus, they are free as well as competent. Make the call!
The damage to your credit score from nonpayment of your second mortgage loan has been done and at this point cannot be undone. The charts below from FICO illustrate how long it may take for your score to recover.
Estimated time for FICO score to fully recover
|Starting FICO score||~680||~720||~780|
|Time for FICO score to recover after these events:|
|30 days late on mortgage||~9 months||~2.5 years||~3 years|
|90 days late on mortgage||~9 months||~3 years||~7 years|
Short sale / deed-in-lieu / settlement (nodeficiency balance)
|~3 years||~7 years||~7 years|
|Short sale (with deficiency balance)||~3 years||~7 years||~7 years|
|Foreclosure||~3 years||~7 years||~7 years|
|Bankruptcy||~5 years||~7-10 years||~7-10 years|
Note: Estimates assume all else held constant over time (e.g., no new account openings, no new delinquency, similar outstanding debt).
Source: FICO Banking Analytics Blog. Copyright Fair Isaac Corp.
Getting your score back to where it was will take from nine months to seven years depending on how high it was before the charge off. Keep making all your payments on time, keep new debt low, and don't add new credit unless you need it to speed your credit recover process along.
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