Sometimes it seems as though some of the things you can do to help your credit
rating are counterintuitive. For example, you might want to close a credit account that you know you’ll never use
again, but it’s better to keep it open with a zero balance because that’s good for your credit history as well as
your credit ratio (how much available credit you have vs. how much debt).
But what about a credit account that was charged off years ago – say a decade or
more – by the credit provider because of serious delinquency? Should you dispute ancient charged-off accounts to
remove them from your credit report, or leave them there to show how long you’ve been in the credit game?
A charged-off account is a bad thing no matter when it occurred in the course of
your credit history. That’s because it is a debt that the creditor decided was uncollectible – usually because it
was delinquent for 120 to 180 days.
Maybe you have turned over a new leaf since that account was closed by the
creditor, and the rest of your credit
history is stellar (or mostly stellar). In that case, even if removing that old charged-off debt means your
credit history will only go back 5 or 6 years, you should take steps to remove it. If your current credit habits
are still not the most responsible, then removing the old debt may not have much of an effect on your credit
score.
The Fair Credit Reporting Act (FCRA) allows negative items to remain on your credit
report for seven years from the first date of delinquency that resulted in the charge-off. But the FCRA also gives
you, the consumer, the right to dispute outdated information and ask that it be removed from your credit report if
it wasn’t taken off automatically after those seven years were up. And a charged-off credit card from 10 or 15
years ago certainly qualifies for initiating such a dispute with the credit bureau.
So for best results (and your best possible credit score), pay down your debts,
keep zero balance accounts open, and by all means dispute old charged-off credit accounts that should have been
removed years ago. If that’s the worst thing on your credit report, you might even see some noticeable improvement
in your credit score.
Finally, you might be wondering if you still owe that debt even if it has been
charged off by the creditor. The answer is yes – the charge-off didn’t erase the debt, it is just an accounting
procedure the creditor uses for tax purposes. In fact, the original creditor might either attempt to collect the
debt after the charge-off or assign it to a collection agency that will hound you day and night.
Not only that, but a fairly recent charge-off may also affect your credit score and
cause you to be denied when you apply for other credit cards. So
it’s certainly worth the effort to get in touch with the original creditor and make an attempt to pay that
charged-off account in full.
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