What does Charge Off mean on my Credit Report? Does Charged Off mean I dont have to pay?

We discuss the ins and outs of charge offs and what they mean to you.

Hey i’m adam jusko this is adam answers where we answer the burning and not so burning questions of the day in this video what is a charge off when you see that on your credit report what does it mean to have something charged off we’re going to talk about it but first i’m going to ask you to please subscribe to this youtube channel if you have not already if you

Have already i thank you for doing so so if you see the words charge off or charged off on your credit report what does that mean well the short answer is that it means somewhere along the line you failed to pay a loan or a credit card probably a credit card and after a certain period of time the bank or other lender that gave you that loan or credit card

Has decided that you are not going to pay too much time has gone by and they sort of have given up on you they’ve written you off written off that loan or that credit card balance as bad debt for tax purposes so they can say we cannot collect on this debt or at least we don’t believe we’re going to collect on it and so they have charged off that debt so say

You had a one thousand dollar balance on a credit card and you didn’t pay it after some period of time could be as little as four months or 120 days oftentimes it could be 180 days those are the periods generally where a credit card company in particular is going to say we’re probably not going to be able to collect this debt and that’s when they would charge it

Off having a charge off on your credit report is not a good thing it could drop your credit score anywhere from 50 to 100 points depending on where your credit report started from so that could mean that in the future you would have a harder time getting a new loan you would have a harder time getting a new credit card if you could get those things it means that

You would have higher fees and interest attached to them now putting aside the question of the damage to your credit report and your credit score what people often ask is well do i have to pay that balance once it has been charged off and the answer is really it’s up to you if you want to pay it or not but you should know what the ramifications are of paying it

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Or not paying it so that original creditor they may have charged off your loan but that’s really like an accounting term a legal term that doesn’t mean that they can’t still come after you for the money so they could still try to collect from you going forward on that money that you owe so it is possible that you could pay that creditor and at least have them

Somewhere on your credit report acknowledge the fact that you finally did pay in full even though they originally charged it off however what is more likely to happen is that once they do charge it off they will probably sell it to a third-party collection agency and what happens there is that third-party collection agency is going to pay some very reduced amount

In order to get ownership of your debt and then they’re going to come after you for that debt to see what they can get out of you so let’s say you had that one thousand dollar debt that was charged off by the credit card company they might sell it to a third-party collection agency that pays only a hundred bucks for it or maybe only 50 bucks for it and if they can

Collect anything on that anything beyond that 50 or 100 bucks that they paid for it well then they could make a lot of profit very quickly if you only paid 100 bucks and you can get 200 bucks out of the person that owed it then obviously you’ve made a hundred percent profit on it so if it gets sold off the original lender that bank they’re out of the picture but

That charge off is still on your credit report but now you have a new entity this third party collections agency that also can report your non-payment onto your credit report so now you have even a second uh line item on your credit report showing that you are not paying off your balance and so when i say it’s up to you to a certain extent if you pay it back or

Not that is because once it gets to a third party collection agency they are not going to leave you alone and the bigger the debt the harder they’re going to come after you to try to get at least some payment forward so they obviously will call you they’ll contact you in any other way that they can think of they may go and get a judgment in the courts which would

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Allow them to potentially garnish your wages they’ll do whatever they can to collect as much as they can because they didn’t pay very much for that debt so anything again that they can get beyond what they paid is profit for them and they work very hard at their jobs so the question for you is how much of that can you sort of take from that collection agency now

If you decide you’re not going to pay that collection agency you will have the original charge off on your credit report from the original lender and then you will have the non-payments from the collections agency because the collection collections agency did pay for your debt they do own it and they do have the right to come after you for it and they do have the

Right to report it on your credit report so it’s up to you to decide what you want to do from there now after seven years from the date that you originally went delinquent on that account so whenever you were supposed to pay originally and you didn’t that is the day of your first delinquency seven years from that it will drop off of your credit report altogether

But of course seven years is a long time now the better you do with credit over time the less that delinquency that charge off is going to hurt you but it’s going to continue to hurt you to some extent for a full seven years now sometimes when a collections agency has purchased your debt part of the negotiation process with them if you will speak to them at

All is that you may try to do what they call a pay for delete which is to say i will pay x percentage of what i owe if you delete this account from my credit report and sometimes collections agencies will do this even though technically they’re not supposed to do it because legitimate information on a credit report is not supposed to get removed so really what

They’re going to do is say that there was an error even though technically there was not an error so pay for delete gets into sort of a gray area in terms of ethics but anyway if you do a pay for delete they can remove the things on your credit report that they put on there but they can’t remove the original charge off that whoever that original lender was put

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On there so let’s say you had that thousand dollars with chase or capital one or bank of america chase capital one bank of america they’re going to leave that charge off on your credit report they aren’t going to take it off unless somehow you could prove that it should not have been yours in the first place and you dispute it but a collections agency on the other

Hand they’ll play it a little more fast and loose and if you do it pay for delete sometimes they are going to call one of the or call the credit bureaus and they they’re going to say oh well we made a mistake that should not have been on there so this is again sort of a gray area ethically but it does happen often that collections agencies will remove things if

You negotiate and pay for delete with them but again even if the collections agency gets rid of the items on your credit report that they specifically put there the original lender is not going to do that the only possible way your chases and capital ones and bank of america’s of the world are going to take something off of your credit report is if there is a

Legitimate error that you could prove that you could dispute with the credit reporting agencies transunion equifax experian if you went to them and could make the case that those were wrong perhaps those would get taken off your credit report they should get taken off your credit report if they were wrong but if they’re legitimate none of those companies is

Going to you know give you any sort of pay for delete deal that is not how they operate so i’d say bottom line charge off is sort of a legal term an accounting term of what your original lender does if you fail to pay after a certain point they essentially give up on you and they say this is bad debt and that’s when that charge off is going to show up on your

Credit report if you have any questions put them in the comments section below and i will do my best to answer them otherwise i thank you for watching please subscribe and we’ll talk to you soon

Transcribed from video
What does Charge Off mean on my Credit Report? Does Charged Off mean I don't have to pay? By Adam Answers