A charge off is when a lender or a creditor has written off the account as a loss, and the account is close to future charges. Does this mean that you no longer have any debt? No, you’re still legally obligated to pay off the debt. If the debt is sold to a debt buyer or transferred to a collection agency it may appear twice on credit reports. One from the original creditor and one from the collection agency or debt buyer, this is what you do not want to happen.
In general, a charge off usually occurs between 120 to 180 days after you become delinquent on your payments. Can a charge off still occur even if you are making payments? Yes. Why? Because you haven’t been making the monthly minimum payment on your account.
A charge-off can dramatically affect your credit score and will remain on your credit report for seven years from the date of the first missed or late payment. Even when a charge off is paid it is still noted on your credit report. However, the negative impact on your credit score is less.
It is in your best interest to try to avoid a charge off. Knowing the timing of a charge off puts you in a better position. With each miss payment it gets harder to catch up again when fees and interest are added to your balance due. If you fall behind, catch up on the missed payments as soon as you can.
If you can predict running into issues with your payments contact your creditor as soon as you can. Speak with them and try to arrange a payment plan to avoid them adding a charge off to your account.