What Does Charge Off Mean on a Credit Report?

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Most consumers don’t realize that when a debt appears as a “charge-off” on their credit reports, they must still pay that debt in full. Even though a charge off sounds like the debt went away, it only went away from the creditor – who sold it to a debt collection agency. No matter who is collecting the debt, it will always be your responsibility to pay it in full as soon as you are able.

A charged-off debt is one that is more than 180 days overdue. Creditors assume that a debt not paid in 180 days is not likely to be paid. Accounting rules allow them to “charge off” the debt from their balance sheets. However, this action does not discharge consumer debt.

Is There a Statute of Limitation on Charge-Off Debt Collection?

As long as the charge-off remains unpaid, the original creditor or the debt collector can continue attempts to collect on the account, which may include suing you for what you owe. However, there are state laws limiting a creditor’s ability to sue in court to collect a debt. Each state sets its own time period, but most don’t allow a creditor or debt collector to sue after three to six years. If the debt owed is older than the statute of limitations in your state, you won’t have to worry about being taken to court.

Read More: Laws on Charge Off Collections

Can You Pay a Charge-Off Account?

You can and you definitely should pay any accounts that show on your credit as charged-off. Until the creditor sells or transfers your debt to a collection agency, the charged off amount will still show the balance owed. Once you pay the balance, the account will show the account status as “Paid Charge-Off,” and the balance will be zero.

However, many times when an account is charged off, the creditor sells the debt to a collection agency. When this happens, the balance on the original account will be zero. This does not mean you are no longer obligated to pay the balance in full. The only difference is that, instead of paying the creditor, you now owe the balance to the collection agency, who is now the legal owner of the debt. Any payments you want to make on this account should be sent to the collection agency. Once you pay the collection agency in full, the account status becomes “Paid Collection.”

How Will a Charge-Off Affect My Credit Score?

A charge-off is a black mark on your credit score that can haunt you long after the debt is paid in full. The Fair Credit Reporting Act states that charged-off accounts stay on your credit report for seven years before they must be removed.

By the time a delinquent account gets charged-off, it’s likely that the damage to your credit score has already been done. A charge-off may be the reason your credit card limit was lowered. If you applied for a credit card in the months right before the charge-off, your application may be declined.

Be aware that paying the balance of the charge-off won’t remove the charge-off from your credit report. The credit reporting agency will update to show that the Charge-off was paid in full or "Charge-off settled" if you reached an agreement with the creditor, and it will show a balance due of zero. Both of these are preferable to a status of balance due.

Even if all your accounts are current and up to date, accounts that show a history of non-payment or delinquent payment are listed in a special section of your credit report under the heading “accounts that may be considered negative.”

The charged-off debt will remain in that category until, at the end of the seven-year period, the negative information will be removed.

Can You Dispute a Charge Off on your Credit Report?

Yes. Most consumers don’t realize that it is illegal for a credit bureau to report inaccurate information. Credit reporting agencies such as Experian, Equifax and TransUnion are required by the Fair Credit Reporting Act to thoroughly investigate all consumer disputes. No legitimate credit reporting agency will remove information that is factually correct.

In order to trigger the dispute system, first notify the reporting agencies. Creditors are also required to investigate any disputes you may have with them. If your creditors insist their records are correct, you can’t take action against them unless you’ve filed a dispute with the credit agencies first.

It’s also important to keep all the financial paperwork you have related to your creditors, including any denials of credit that you have received. They are proof you may have been harmed by the credit report error. It’s also important to keep track of all your correspondence related to the dispute in case the agency claims it didn’t receive notice of the dispute.


  • A charge-off on your credit report is a debt that is more than 180 days overdue. At this point, the creditor may transfer the debt to a collection agency who will try to collect the debt. A charge-off does not discharge the consumer debt, which remains on your credit report for seven years.

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