There is a great deal of confusion with consumers about what to do about charge-offs on a credit report. It is well known that charge-offs are considered to be derogatory credit but what is the best way to handle it? Do I pay off this bad debt? Should I not pay off this bad debt? Well the answer may confuse you as the answer to both questions is "yes"!
When a lender is not able to collect a debt they remove it from their accounts and report a charge-off to your credit account. Many times they will then give the account to a collection agency which can be a double problem for you as the consumer because both the original debt owner and the collection agency will report the bad credit for just one debt.
Your credit can be influenced by a charge-off for as long as 7 years. You can get an old charge-off deleted from your credit, however this is easier to do if the charge off is a paid charge-off. Even so the problem with paying off an old charge-off is that the account then becomes current and the cycle of 7 years starts over again so a "paid charge-off" will show for another 7 years no matter how many years it was on there before.
The only way to fix this dilemma is to use a technique called a "pay for delete". Before you pay off the old debt get an agreement in writing from both the original lender and any collection agencies that they will remove the negative information from your credit report upon payment. This is the only effective way to pay off an old charge-off and deflect future problems.
Many people are unaware that they have the right to dispute items shown on their credit report. The Fair Credit Reporting Act states that any consumer can dispute any derogatory credit on his or her credit report and this means charge-offs, collection accounts, tax liens, judgments, repossessions and even bankruptcies and foreclosures. You can dispute these items and get them deleted yourself or you can hire a professional credit repair agency to assist you.
To dispute something on your credit report begin by contacting the consumer reporting agencies. You can call them on the phone or contact them online but the safest way to contact them is to send a formal letter. That way you will always have the proof in a paper trail. Make sure each agency that is reporting the bad credit gets a copy of the same letter and make sure that you keep strict documentation of all of your efforts. The agencies have 30 days to investigate your allegations somake sure you document the dates.
During that 30-day period the credit reporting agency is supposed to contact the original lender and the collection agencies with your disputes. They will also verify any public records. It is up to you to follow up with them and make sure that everything is being completed. Credit repair takes some time to finish but if you don't follow up it can end up taking even longer.
While it is possible to repair your credit by yourself a professional credit repair company has developed the knowledge and expertise to simplify the process. Since a professional can do it quicker and easier it may be worth your time to consult with them first to see if they can help you.
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