How to Dispute a Charge-off on Credit Reports

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A charge-off on a credit report is detrimental to credit scores, especially if it is recent. But how accurate is the information being reported about that charge-off?

What is a Credit Charge-Off

Banks, lenders and credit card companies will write off an account balance after a certain amount of time of nonpayment. That account balance is now a bad debt and referred to as a “charge-off.”

The time-frame of an account balance going to a bad debt is usually 180 days of non-payment. The creditor can no longer keep the debt on their books as an asset and therefore write it off as a bad debt.

The account balance is placed as zero on their books. But this does not mean you no longer owe the debt. The account may be transferred or sold to a collection agency and a negative credit mark will be entered on your credit reports. Charge-offs are difficult to remove but there are ways to dispute a charge-off which may result in it being removed from your credit report.

Unpaid charge-offs can also lead to a legal action. The original creditor or collection agency can pursue legal action as long as the debt is within the statute of limitations. After the statute of limitations has run, a debtor can no longer be sued and the debt basically becomes uncollectible.

Base charge-off disputes on a factual inaccuracy

 
Account Balance. Has the account been transferred or sold to a collection agency? If so, the account balance should be at zero. Many times the account balance will report on the charge-off account as well as the collection agency account. An original creditor who has sold or transferred the account to a collection agency cannot continue to report a balance. This is a factual error that can be disputed because it is inaccurate or incorrect credit reporting.

Dispute the balance and ask for a deletion. Sample Letter: I am writing to dispute [name of account and account number] on credit report number [xxxxxx]. The balance listed on the account is incorrect. Please delete the account.

The letter does not have to be long. Make no mention of the fact the account has been transferred or sold to a collection agency and that the balance should be zero. In other words, do not help the credit reporting agencies “correct” information.

Always ask for a deletion of the entire account because corrected negative information does not help improve your credit score. But keep in mind the credit bureaus are not required to delete incorrect information; they can simply correct the information to reflect accurate reporting.

Open Date of Account. Is the opening date of the account correct? If not, dispute the date. It may be a minor issue; nevertheless, it is a factual error you can base a dispute upon. A simple letter stating the opening date is incorrect. Request a deletion of the entire listing. Do not give them the correct opening date as it is their responsibility to investigate, not yours.

Highest Balance. This category on a credit report can often be incorrect. Dispute the “highest balance” you never know, you may get the entire listing deleted if the original creditor cannot provide the correct high balance especially if the account is older and they no longer have the records.

Late Payments. Are there late payments after the account has been charged-off? If so, how can that be? There should be no delinquencies after the “closed” date. Additionally, does the credit report show an amount charged off along with a past due amount? If so, this is incorrect reporting if the charge-off account has been sold or transferred to a debt collector. Request a deletion. It may only be corrected to reflect a past due amount of $0 but at least try to get a deletion because accurate negative information is still negative on your credit reports.

Dispute account status. Charge-off accounts that have been sold should not be listed as currently open by the original creditor. Request a deletion of the account even though it may only be corrected, as stated above, it does not hurt to request deletions.

Dispute Re-Aged Accounts. Creditors and collection agencies that re-age accounts are seriously affecting your credit score. It is imperative that you dispute re-aging of accounts. Re-aging causes a negative account to appear more recent. The more recent the charge-off appears to be, the more detrimental to your credit scores. Re-aging also causes an item to stay on your credit report longer which is not only illegal but also a credit score killer!

There is an exception to disputing charge-offs. Let’s say the charge-off account has been paid and two years have passed. It may be wise to just leave it be. Removing it may lower your credit score because of the date of last activity. You want to avoid the date of last activity on the account appearing as current. Remember some older negative entries matter less when calculating credit scores. Once a charge-off gets 48 months or older, it is no longer being used to calculate your credit score. Unless you are purchasing a home or in the cross-hairs of being sued for unpaid debt, leaving it alone may be the best strategy.

Exercise Caution when disputing an older Charge-off

 
When disputing a charge-off you run the risk of lowering your credit score if the dispute returns verified as accurate. This can hurt your credit score because the credit bureaus will update the last date of activity on the account. Once the date of last activity is updated the negative account appears recent. Often times older charge-offs are not updated monthly by the original creditor which is good for your credit score.

Recent activity, whether that activity is a payment, a missed payment or monthly reporting by an original creditor, all counts as recent activity. Updating a negative charged-off account does nothing but causes the negative account to look more recent. Recent negative information on your credit reports is more detrimental then older negative information. Just consider all possibilities when disputing a charge-off; it may be better to let it age off.

As you can see there are several options in disputing a charge-off. Consider allowing a professional repair your credit. Lexington Law helped clients remove 461,721 charge-offs in 2013 alone which included late payments and charge-offs. Call for a free credit repair consultation today (877) 587-4574.

Because of the many questions consumers have about charge-offs, we have developed the Charge-Off Dispute Center which lists the many questions and answers regarding various charge-off issues. Please visit for further information.



Comments

  1. I was laid off in 2008 and got behind on my credit card bills. When I started working again they told me I had to have it paid off the balance in 1-3 payment or they would do a charge off. Of course I didn’t have that kind of money so they got charged off. Most of them were charged off in april 2009. Some were a little later. I just looked at my credit score and it is a mile long. The companys sold my debt so many times. The ones that were sold are new, they have a 2011 date through the third party. They all say that they are closed but all most all of them have a balance due and a past due balance. Can I do anything or sould I just let the time run out. I’m still not in a postion to pay the debt off.

  2. Tanesha Gregory says:

    Well, my concerns are layered. I leased a vehicle with a major car company. I paid on time each month. I turned my car in with a zero balance (in terms of monthly payments). The month after I returned my vehicle I got a final account statement via mail indicating that I had a balance of $1,300 for mileage. Fine, I write them a letter saying I couldn’t pay the full amount at once, but I did want to make payment arrangements. I also included a payment with my letter. Small payments were made each month and by the fourth month the account was paid off. Please keep in mind the the original creditor AND their collection agency were contacting me at the same time. The small payments were rendered to the original company and the final payment was rendered to the Collection agency. Recently, I reviewed my credit report and noticed they listed my account as a charge off. The high credit amount was wrong (I’m not really sure what that is) but if my lease was paid off and the mileage is calculated seperately isn’t the 1300 the high amount? The first date of delinquency is listed as the date of my initial account settlement letter. Do I have a fighting chance? Isn’t a charge off when a consumer is making no payments over a period of 180 days. I had the entire matter settled within 120 days. Please advise. Thanks!

  3. In January 2008, my house was foreclosed on and the house was sold in an auction and the first bank was paid off. I had a 2nd mortgage where I have a charge off of $75,000.00 on my credit report. How can I have this removed from my credit report? Is my only option bankruptcy? Or is there another option I can work on?

    Thank You.
    Rosana Senise

  4. Where can I ask a question? I am curious about a 2nd mortgage charge off with HSBC. Once my ex allowed our former house to go into foreclosure, the 2nd mortgage company never made a demand for payment and when I called to discuss a payment arrangement, the rep stated they cannot legally pursue me for the debt in Georgia, however, isn’t the negative charge off on my report a way of pursuing the debt? I tried to make a payment arrangement that day, but she asked if the house was already foreclosed, and when I responded that it was, she stated they could not pursue me in Georgia. I guess they chose to write it off. One bureau is reporting a high balance and the others are not reporting a high balance. One bureau shows the account as a charge off but not closed. After I disputed the balance, one bureau removed the past due balance. 2 bureaus show it has a past due balance. Can we only dispute the past due balance IF it was sold to a collection agency? Seems like if it was charged off, there would be no past due balance. Again, the company stated they could not pursue collection in Georgia for some reason. I haven’t been able to verify any state rules/laws about that. Maybe it was the instrument I signed. The loan paper I signed did not say anywhere that I was personally liable, only that the house was being used as collateral. Once the house was foreclosed, I guess they couldn’t pursue me personally. Not sure. I never received a demand notice for payment or any further contact from HSBC except the charge off on my credit report. Any advice you can offer?

    • Lisa Phillips says:

      Your situation is more complex than the average account charge-off because it involves real estate which is a secured debt. You are correct in that a charged off debt should not have a past due balance and it can be disputed; however, in your situation, any success with disputes may be temporary. I strongly doubt the lender is going to be content with simply charging off a HELOC without pursuing you for the debt at some time in the future.

      The best advice I can offer is to contact a real estate attorney in your area, that way you can find out why the lender stated they could not pursue you in Georgia. Perhaps there is some type of moratorium currently in place which is preventing the lender from pursuing you. In any case, I would definitely contact a real estate attorney and preferably one with a background in the Fair Credit Reporting Act.

      Since you mentioned a willingness to pay, you may be in a good position to get that negative mark deleted from your credit reports in exchange for payment arrangements. Again, contact an attorney to see if they can negotiate a settlement. Naca.net has a listing of attorneys by state which specialize in consumer laws, including debt collection, foreclosures and mortgages. Good luck to you.

  5. Thanks for responding. The issue is an old repo and I never received a letter saying how much I owed after they sold the car. So I have no idea what they recovered. Keep in mind, I was almost done paying the car off when it happen. Long story and long time ago… The issue is they charged it off in 2005 and the original amount of the charge off versus what is owed now is about $1500 more. On 2 of out 3 of my reports, it shows my high balance as $3400 and current as $4900. When in reality, my high balance was $13,000 and I had paid $14,085 at the time of possession. I am just not sure how it should be reported since each credit bureau is reporting the numbers differently but they all show a charge-off. BTW, there is no collection agency reporting on this account. I am cleaning up my credit and this is the one thing I am not sure of how to approach. I refuse to pay anymore money to them because of how shady they were when this happened and I more than paid what I owed and I am still paying by have the negative mark on my reports.

    • Lisa Phillips says:

      While there appears to be factual errors you can dispute I think you should legal advice from a consumer law attorney first because you never received a defiency balance. This really concerns me because most states require lenders to follow very specific repossession laws or the lender may not be able to offset the loan deficiency of the car loan and collect from you. Each state has their own repossession laws but most involve consumers receiving proper notice of the loan deficiency. You can read more at car repossessions and credit disputes but I would definitely seek legal advice before disputing because your rights may have been violated. Naca.net lists consumer law attorneys by state and some specialize on this very subject. Often you can get a free consultation. Good luck to you

  6. Hello, Lisa

    Does this advice apply to any account that has been charged off or only for revolving accounts?

    • Lisa Phillips says:

      The accuracy of any type account can be disputed as the FRCA requires only accurate information be reported by the credit bureaus. So if you discover an error or mistake in the information being reported in any type of charged-off account it can be disputed. Just remember, if the disputed information is verified to be accurate the date of last activity on the account may be updated which would make the negative account look more recent. Recent negative activity is more detrimental to your credit scores than older negative information on your credit reports.

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