When you fall behind on payments for a loan or credit card, your lender may eventually decide the account is unlikely to be repaid. At that point, the creditor may label the balance a charge off. A charge off is an accounting decision, not a forgiveness of the debt. You still owe the money, and the account continues to affect your credit.
A charged off debt is one of the most serious negative entries that can appear on a credit report. It can limit access to new credit, increase interest rates, and complicate housing or employment applications. Understanding what a charge off means, how it is reported, and how long it stays on your credit report is essential for protecting your financial future.
If you stop making payments on a credit card or loan for a sustained period, typically around six months, the creditor may mark the account as charged off. On a credit report, this usually appears as “Charged Off” or “Charge Off” next to the account name.
This entry signals that the lender considers the debt a loss for accounting purposes. It does not mean the debt disappears or that collection efforts stop. You remain legally responsible for the unpaid balance, and the account continues to be reported as delinquent.
From a lender’s perspective, a charge off reflects a breakdown in payment history, which is one of the most heavily weighted factors in credit scoring models. Even after a balance is paid or settled, the charge off notation itself can remain visible.
A charge off and a collection account are related, but they are not the same thing.
After a charge off occurs, the original creditor may:
If the debt is sold or transferred, your credit report may show both:
This dual reporting can amplify the negative impact because it creates multiple derogatory entries tied to the same unpaid debt. From a scoring standpoint, this compounds risk signals tied to missed payments and delinquency.
For more on debt collection, see these resources from the Consumer Financial Protection Bureau and the Federal Trade Commission (FTC).
A charged-off account is not the same as a closed account.
Accounts can be closed for routine reasons such as inactivity, refinancing, or at the consumer’s request. A closed account does not harm your credit score unless it carries an unpaid balance.
A charged-off account, by contrast:
This distinction matters when reviewing credit reports or disputing inaccurate entries.
A credit card charge off is often more harmful than other types of charged-off debt because credit cards are revolving accounts. Revolving credit affects both payment history and utilization, two core credit scoring factors.
A credit card charge off can:
Because revolving balances update frequently, missed payments and charge offs on credit cards tend to have a stronger immediate effect than installment loans.
To avoid this kind of charge off, see our tips on how to pay off your credit cards every month.
A credit report indicating a charge off is among the most severe negative for your FICO score. It tells future lenders that the account was not paid as agreed and that the creditor stopped expecting repayment.
A charge off can:
A charge off will affect your credit score more strongly the more recent it is. Over time, its impact may fade slightly, but it does not disappear until the account ages off the report.
A charge off stay on your credit report for up to seven years from the date of first delinquency, not the date the account was officially charged off.
This distinction matters. The reporting clock starts with the first missed payment that eventually led to the charge off. Paying or settling the account does not reset the timeline.
During this time:
Consumers can verify timelines by reviewing reports through the federally authorized source for free annual credit reports.
Applying for new credit while a charged-off debt is present can be difficult. Lenders may interpret the charge off as unresolved risk, even if the balance has been paid.
A charge off can affect:
Some lenders may require higher interest rates or larger deposits, while others may deny applications outright.
One practical way to avoid charge offs is using automatic payments. Automating at least the minimum payment reduces the risk of missed due dates that lead to delinquency.
Automatic payments can typically be set up through:
Automation works best when paired with active account monitoring. Insufficient funds can still result in late payments or returned transactions.
In most cases, a charge off cannot simply be erased. Credit bureaus are required to report accurate payment history, even when that history reflects missed payments or default.
That said, there are limited situations where action makes sense.
If a charge off is reported incorrectly, you have the right to dispute it. Common errors include:
The reporting time frame for a charge off is tied to the date of first delinquency, not the date the account was charged off. If those dates are wrong, the account may be eligible for correction or removal.
For step-by-step guidance, Credit.org’s guide to disputing credit report errors explains how to file disputes properly and document responses.
Some consumers attempt a pay-for-delete, offering to pay a charged off debt in exchange for removal from the credit report. While this does happen occasionally, it is not guaranteed.
Important considerations:
Even when a charge off is paid, the entry usually updates to “paid charge off”, not removal.
Like other negative credit entries, a charge off stays on your credit report for seven years before dropping off automatically. During that time, collectors may still contact you, but they cannot provide legal advice or make false threats.
From a scoring standpoint, both paid and unpaid charge offs are negative. However, lenders often view a paid charge off more favorably than an unresolved one.
Paying a charged off account may:
It will not immediately restore your credit score, but it can help stabilize your profile when paired with positive activity on other accounts.
Once a charge off appears, ongoing credit monitoring becomes important. Monitoring helps you:
You can monitor reports for free through the federally authorized source for annual credit reports, or through reputable credit monitoring services. Review bank statements and creditor reports carefully to catch errors early.
A charge off doesn’t just affect your credit score, it can affect broader financial decisions.
A charge off generally may:
Because lenders rely heavily on past performance, a charge off remains relevant until it ages off the report, even if newer accounts are in good standing.
If you’re dealing with multiple charged off accounts or ongoing debt collection, structured help may be appropriate.
A debt management plan through a nonprofit credit counseling agency can help:
Credit.org’s debt management programs focus on repayment and stability, not quick fixes or risky shortcuts.
As discussed earlier, automatic payments are one of the most effective tools for preventing future charge offs. Automation reduces reliance on memory and lowers the risk of accidental missed payments.
Best practices include:
Automation works best when paired with awareness and cash-flow planning. These kinds of good personal finance habits will help you avoid having charge offs happen in the first place.
A charge off is serious, but it’s not irreversible damage. What matters most is what happens next.
Ignoring the issue allows:
Addressing an old debt that was charged off—whether through dispute, repayment, counseling, or time—can limit further harm and help rebuild your credit profile.
If you’re unsure how to proceed, speaking with a certified credit counselor can clarify options and help you avoid costly mistakes.
