A charge off can be and is serious, but it’s not the end of the world. A charge off occurs when a lender or creditor has not received payments from you in several months or longer. In order for then to keep their ledgers balanced they must drop all liabilities. When your creditor can’t claim your account as an asset anymore, it becomes a liability. This happens when your account becomes seriously delinquent. After a while your account closes and becomes an noncollectable debt. At this point your account becomes eligible for a charge off. Your creditor will not stop trying to collect payments from you; in fact, they will place your account with a collection agency.
You will of course have a derogatory mark on your credit report. While one negative mark will not ruin you, it can damage your credit even more. If you have receive a telephone call or a letter from your creditor stating that your account is about to be charged off (don’t fret). Try to negotiate for smaller payments, reduced payments, and an extension of it possible some type of settlement. Creditors or collection agencies will often times try to make a deal with you. They will often take partial payments (over a period of time) or post dated checks. Some agencies will even offer you a one time deal.
If you pay your debt off in a set amount of time they will knock off a huge percentage off the entire bill. Charge offs remain on your credit report, for several years. It will eventually come off. Until it does come off; you will probably not qualify for a house loan or car financing. Creditors don’t like to lose money; they are in business to make money. If you can, make a payment arrangement, before a charge off is placed on your credit report. You need to work closely with your creditor(s) and document all payments that you make to your account.
Check your credit report periodically after you have made a deal with your creditor. You need to be certain that the charge off has been postponed from being entered into your credit report; if that is your arrangement. You are entitled (by law) to receive one free copy of your credit report annually. Take advantage of this offer.