Getting a credit card to charge off balance is never a good thing. Should you be unfortunate enough to have your credit card “charge off” its balance, you will be kicking yourself a million times over for the mistake. A charge off occurs when a creditor writes off an account balance as a bad debt. These bad debts don’t go away like you think they might. Instead, they are directed to a credit collection agency. Credit collection agencies have extreme penalties for people who don’t pay their debts back. They can sue potentially sue the borrower to collect the balance that is owed.
To get a credit card to charge off balance, you usually have to be behind in your payments at least six months or so. The rules of accounting force creditors to zero out the amount owed to them as a “bad debt”. But make no mistake about it, this debt is by no means gone. Making every effort you can to pay your minimum payment on time, every time, will ensure you never get your credit card to charge off balance.
What can you do if your credit card is already charging off balance?
You can reconcile with the credit collection agencies that will attempt to collect the bad debt from you but other than that it’s a dead end road. Your credit card account will soon be invalid and you will be forced to sign up with another credit card company if you ever want to own a credit card again. However, with the delinquent payments and charge off on your credit report it will take a major tole on your current credit standings. Therefore leaving the borrower in a position where it will be difficult to obtain another credit card or any type of loan at that.
It is important to contact the collection agency as soon as you find out the debt has been charged off so you can attempt to settle the amount in a professional matter. These collection agencies are typically good at negotiating a settlement (lump sum payment) or a repayment plan to wipe out the amount owed. The sooner you pick up the phone and make the call, the better chance you have to reach a settlement instead of allowing them to force collections upon you. Many borrowers are able to settle their credit card debt for less than 50% of the outstanding balance.
Making the right financial decisions can help you from making this costly mistake in the first place. A credit card that charges off your balance will leave a negative mark in your credit score. These marks take 7 years to resolve themselves and be removed from your ongoing credit rating. Simply making the minimum payments every month is enough to keep the dreaded “charge off” from ever bothering your financial bottom line.
If you credit card has been charged off and you need a new loan or another credit card in the near future, it is crucial you do everything in your means to slowly rebuild your credit rating as soon as possible. For those individuals who do nothing to rebuild their credit score do not expect any lending institution to provide assistance for years to come.
In this article (how to fix my credit score) you will learn a few different strategies that will help you on your path to a clean credit report.