Will Deleting a Charge-Off Improve My Credit Score?

A charge-off indicates you failed to honor an agreement with a previous creditor, and it is one of many items that negatively influences your credit rating. The Fair Credit Reporting Act (FCRA) notes that a charge-off appears on your credit report for seven years before being automatically deleted. Removing a charge-off from your credit record will improve your credit scores.

Credit Impact

How much a charge-off affects your credit scores depends on other data present in your credit file. Removing a charge-off impacts each individual's credit rating to a different degree, but the change is always a positive one. Once a charge-off disappears from your credit report, it is longer visible to lenders reviewing your records, and credit-scoring formulas no longer consider it when determining your scores.

Charge-off Disputes

If a charge-off appears on your credit file inaccurately or for longer than the seven-year reporting period mandated by the FCRA, you have the legal right to dispute the charge-off with the credit bureaus. Federal law requires the credit bureaus to investigate disputed credit information, and, if the information provider (creditor) cannot validate the disputed charge-off, the credit bureaus must remove it. The FCRA also gives you the right to dispute a charge-off with the information provider directly.

Credit Repair

A charge-off can have far-reaching consequences. Creditors typically sell charged-off debts to debt collectors, and collection agencies add their negative reports to your credit file after purchasing the debt. Should the original creditor or a collection agency sue you to recover the unpaid debt, a court judgment against you can also appear on your credit report, causing further credit damage.

You can avoid the future credit consequences a charge-off carries by settling the balance with the original creditor or, if possible, by paying off the debt in full. While paying the debt does not directly influence your credit rating, a paid charge-off always looks better to those reviewing your credit history than a debt left unpaid.

Negotiating With Creditors

Although creditors have various policies regarding modifying credit information, all consumers can attempt to negotiate with their creditors for more favorable reports following a charge-off. Creditors have the power to modify reports they previously filed with the credit bureaus. Thus, you can request that the creditor remove the charge-off from your credit report in exchange for payment. Once the company removes the charge-off from your credit history, your credit scores will improve.