Charge-Off
CreditGlossary term
Definition
A declaration by a creditor that a debt is unlikely to be collected, typically after 180 days of non-payment, which is then written off as a loss on the creditor's books. A charge-off is one of the most damaging items on your credit report and remains there for seven years. Even after a charge-off, you still legally owe the debt, and the creditor may sell it to a collections agency.
Related terms
- CollectionsThe process by which a third-party agency attempts to recover money owed on a delinquent account that the original creditor has given up trying to collect. Having an account in collections severely damages your credit score and stays on your credit report for seven years from the date of the original delinquency. You have legal rights under the Fair Debt Collection Practices Act regarding how collectors can contact you.
- Payment HistoryA record of whether you have paid your credit accounts on time, which is the single most important factor in calculating your credit score. Even one late payment can significantly lower your score, and the impact increases with the severity of the delinquency. Consistent on-time payments over many years build a strong credit foundation.
- Credit ReportA detailed record of your credit history maintained by credit bureaus, including your accounts, payment history, balances, and any public records like bankruptcies. Lenders, landlords, and sometimes employers review your credit report to assess your financial reliability. You are entitled to one free credit report per year from each of the three major bureaus through AnnualCreditReport.com.
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