Paying less than the minimum payment on credit cards can lead to a charge-off unless you enroll in a credit card hardship program.
A Charge-Off is one of the most damaging credit notations you can have on a credit report. It can ruin a good credit score for up to 7 years. Charge-offs occur once a debt has been uncollected for up to 180 days. The creditor no longer counts the money you owe as a source of profit, but instead, charges it off as a loss.
A charge-off on a credit report is detrimental to credit scores, especially if it is recent. But how accurate is
Re-aging of a debt essentially turns back the clock on when a debt is scheduled to drop off your credit reports.
Creditors may write-off seriously delinquent accounts in the form of a charge-off but that does not mean you are free and clear from paying the debt.
Creditors that charge-off accounts and sell them to debt collectors must update balance to $0. If the unpaid debt is assigned to a debt collector, the creditor and debt collector can both report the unpaid balance.
Car finance company may have in its contract that a car loan can be charged-off even when making timely payments if the car is destroyed or stolen, or its value substantially depreciates.
Charge-offs hurt your credit scores, whether paid or unpaid. But when applying for a mortgage loan it ‘s better to pay the charge-off so it won’t be factored into your overall credit utlization.