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Can a creditor charge-off an account that has been paid in full?

paid in full

Question: I already submitted a dispute to Equifax today. After I did this I read one of your articles indicating that may not be the best strategy for an older charge off due to an update on negative history. Scenario: My Capital One Visa was 150 days delinquent and I paid the account in full October 2011. My credit report indicates Paid Charge Off/Acct Closed by Credit Grantor in November 2011, the following month.

I called Capital One and spoke a few managers to try to get the information updated to closed/paid instead of charge off and they would not budge. They confirmed with me that I paid in full in October and the acct was charged off in November. I am under the impression that since there was no balance to write off, it should not be listed as a charge off. If I am wrong, is it possible to cancel a dispute with the CB to avoid an update on the acct activity? Thank you.

Answer: Your situation is an interesting case. Since most credit disputes are automated I am unsure if they can somehow be revoked. You will have to call Equifax and speak with a customer service representative. Look, I would not worry about that now; there’s always a possibility Capital One may not respond in time to the dispute and the item may be deleted. Wait and see what happens, it could end in your favor.

Here are a few strategies you can try if the first dispute does not work:

1. Dispute directly with Capital One. The direct dispute rule says you can dispute with the original creditor and they are under the same obligation as the credit bureaus to investigate within 30 days or the account must be deleted. Do you have proof the account was paid in full before it was charged off? If so, include that supporting documentation.

The 623 method of disputing does not work in the same way as a traditional credit bureau dispute because you are not asking for “verification” of the debt, but for an “investigation” as to the accuracy of the records on that debt. Send the dispute to the legal department of Capital One; that should get someone’s attention.

2. Dispute with Credit Bureaus. Dispute again with the credit bureaus but include the October 2011 proof of payment in full prior to the November 2011 charge-off. The notation of a $0 charge-off should be enough for the credit bureaus to either delete the charge-off or mark it as Paid/Closed or Settled .

3. Bombard them with Complaints. Now here comes real dedication. If, after you dispute with creditor and credit bureaus but are still unsatisfied, bombard them with complaints. Start with the Better Business Bureau. The complaint would be simple: Capital One unfairly charged-off a paid in full account and you want the inaccurate entry deleted from your credit reports immediately.

File a Complaint with the Federal Trade Commission, your State’s Attorney General and the Consumer Financial Protection Bureau. Basically become an absolute nuisance. Sometimes it works but it takes tenacity. If all fails, seek legal action.

4. Build a solid credit foundation. There are ways to counteract negative information on your credit report without ever disputing negative credit. Start by making sure all credit card and loan payment are on time. Your credit score is mainly calculated by revolving credit accounts according to a new study. Payment history is 35% of your credit score so it’s very important to make all obligations on time.

The next thing to do is reduce credit card balances to 10% or less of your available credit limit. Eliminating outstanding debt will have a positive impact on your credit scores. Never max out your credit cards.

Make sure you have more positive accounts and installment loans reporting on your credit report than negative information. When your credit score is calculated it mainly uses the previous 2 years of information so you want current positive information. Follow the tips on How to get a Credit Score of 800 for more tips. The best of luck to you.

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