How to Handle Old Charged-Off Debts on Your Credit Report

Posted: April 3, 2013
How to Handle Old Charged-Off Debts on Your Credit Report

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


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you, the consumer, the right to dispute outdated information and ask that it be removed from your credit report if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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