A charge-off occurs when a creditor writes off a delinquent debt as a loss after the borrower has failed to make payments for an extended period, typically 180 days (6 months). A charge-off is one of the most damaging entries on a credit report and can lower your credit score by 100+ points. The debt is not forgiven — the creditor may sell it to a collection agency, and you still owe the money. Charge-offs remain on your credit report for seven years.
Charge-Off
Definition
A charge-off occurs when a creditor writes off a delinquent debt as a loss after the borrower has failed to make payments for an extended period, typically 180 days (6 months). A charge-off is one of the most damaging entries on a credit report and can lower your credit score by 100+ points. The debt is not forgiven — the creditor may sell it to a collection agency, and you still owe the money. Charge-offs remain on your credit report for seven years.
Example
After missing 6 consecutive monthly payments on a $3,000 credit card balance, the issuer charges off the account. The cardholder's credit score drops from 700 to 580, and the debt is sold to a collection agency that begins contacting them for payment.
Key Points
- 1Occurs after ~180 days of non-payment
- 2One of the most damaging credit report entries
- 3Debt is not forgiven — may be sold to collections
- 4Remains on credit report for 7 years from first delinquency
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