Sticky charge-offs stay on credit report for years


At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict , this post may contain references to products from our partners. Here’s an explanation for

Dear Credit Card Adviser,
A few years ago, I had a credit card charge-off. After the charge-off, the lender took me to court and won a judgment for the amount I owed. My question is: Can the lender still report it as a charge-off on my credit report? It’s been a few years since the judgment.
— Jay

Dear Jay,
You’re not alone with your charge-off question. Several readers have written in asking about how charge-offs are reported on credit reports and how long they stay there after the bad debt moves to a collector or judgment. The short answer is: A charge-off stays on your credit report for seven years from the date of the last delinquency, as dictated by the Fair Credit Reporting Act, or FCRA.

Here’s why. Your credit report is a historical record of your debts, starting with when the account is first opened and following it to its most recent status. A status of the account can be updated, but its history cannot be deleted until the statute of limitations is up, as dictated by the FCRA.

For credit card accounts that are open, the credit report will list most recent payment history, whether that’s on-time payments or delinquencies. For accounts that are closed, the lender will report a final status.

A charge-off is one type of final status for an account and means that the lender has written off the debt as uncollectible. The lender can either get a judgment against the borrower or transfer the debt to a collector.

A judgment is a public record and is listed as such on a credit report. It is a separate listing from the charge-off. If you pay the judgment, it will be updated to “satisfied” on your credit report but will not be removed from it. The judgment itself will remain on your credit report for seven years from the date of the court filing, whether or not you pay it. However, a paid judgment will hurt your credit less than an unpaid one, and the judgment’s negative impact — whether paid or unpaid — will lessen over time.

Sometimes a lender won’t take a bad debt to court for judgment. Instead, the lender will sell or transfer the debt to a debt collector. In that case, your credit report will list the charge-off and will note that the debt has moved on to collections.

The debt collector will open a separate collections account for the debt, which will be listed on your credit report. The balance may differ from the original debt because the debt collector can charge interest. The collections account will stay on your credit report for seven years from the date of the last delinquency of the old debt, same as the charge-off.

If you settle the debt or eventually pay it off in full, that will be listed as the most recent status of the collections account. In some cases, the original debt will be listed as paid or settled as well. But, in every case, the charge-off status will remain as part of that debt’s history for seven years.

Get more news, money-saving tips and expert advice by signing up for a free Bankrate newsletter.

Ask the adviser

To ask a question of the Credit Card Adviser, go to the “Ask the Experts” page and select “Credit Cards.” Read more columns by the Credit Card Adviser. Follow Janna Herron on Twitter.

Bankrate’s content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate’s Terms of Use.