Credit glossary
Charge-off
A lender's accounting decision to write an unpaid debt off as a loss, usually after months of missed payments, while you still owe it.
A charge-off changes the lender's books, not your obligation. The account usually shows the late payments that led up to it and then a charged-off status, and the debt may later be sold or placed with a collector, which can add a separate collection account. Under 15 U.S.C. 1681c(c), a charged-off account can be reported for seven years starting 180 days after the delinquency began, whoever owns it later.
Paying a charge-off updates it to paid or settled, but it doesn't remove it. That surprises people who've read that newer scores ignore paid collections: FICO 9, FICO 10 and VantageScore 3.0 and 4.0 skip paid collection accounts, which are a different entry type from a charge-off. Check whether the debt was sold before paying anyone, because a sold account should show a $0 balance with the original lender.
Guides that go deeper
- Charge-off vs. collection: two entries, one debt, different rulesA charge-off is the lender writing off your debt; a collection is someone else trying to collect it. Why both can show up, and how each is scored.
- The date of first delinquency and the 7-year reporting clockThe date of first delinquency decides when a collection or charge-off must leave your report. Here is the 180-day rule and how to compute your own date.
Sources
- 15 U.S.C. 1681c: Requirements relating to information contained in consumer reports, Legal Information Institute, Cornell Law School
- 15 U.S.C. 1681s-2: Responsibilities of furnishers of information to consumer reporting agencies, Legal Information Institute, Cornell Law School
- How do collections affect your credit?, myFICO
- FICO Score versions, myFICO
This is education, not legal or financial advice. Spot an error? Tell us and we'll fix it.