It’s not always possible to remove an accurate charge-off from your credit report, but it’s worth trying. These steps might work for you:
1. Determine the details of the debt
First, you’ll need to collect all the charge-off debt details. This includes who owns the debt, how much it is and how old it is. You’ll need to negotiate with the entity that owns the debt. If your debt has been passed on to a collection agency, you won’t be able to negotiate with the original lender.
2. Try to negotiate a pay-for-delete arrangement
If your debt is still with the original lender, you can ask to pay the debt in full in exchange for the charge-off notation to be removed from your credit report. If your debt has been sold to a third party, you can still try a pay-for-delete arrangement. The debt owner still wants to collect their money, so they might be open to a pay-for-delete arrangement.
If your debt is now sitting with a collection agency, it can work to your advantage. A debt collector can pull your credit report and see if you have ways of paying off the debt, such as a credit line or an available balance on a credit card. This is a strong motivator for the debt owner to work with you.
Additionally, you can assume that if a collection agency now owns your debt, they bought it for a fraction of the total amount. This means they’ll potentially be willing to accept less than your total debt amount as payment.
When you’re negotiating, some financial experts suggest offering just 25 percent of your original debt if you have a large sum. The collection agency might push back and ask for more, but you can begin negotiations and settle on an amount you deem fair (and can afford). If you have a small balance, such as $500, it’s more likely that you’ll have to pay the full amount to the collection agency.
Note that there are pay-for-delete letter templates you can use, though they aren’t guaranteed to work. These letters may have a higher likelihood of success if someone with authority sees them. Don’t address your letter to a general department or public correspondence address. Instead, do some research and find the name of a manager or someone high up who has the power to act on and approve your request.
3. Get any agreement in writing
A pay-for-delete arrangement is legal under the Fair Credit Reporting Act. However, the lender isn’t legally obligated to honor the request and remove a charge-off from your account. So, while you may ask for the arrangement, the lender can say no.
For this reason, you want to ensure you get the pay-for-delete arrangement (or any other agreement) in writing. You should get the details of the arrangement written out on the company’s letterhead. This includes the amount you’re going to pay, that you won’t owe any more after you make the payment and that the creditor intends to remove the charge-off from your credit reports.
What if the charge-off is inaccurate?
Check your credit report(s) to see if the details of the record are accurate—if some of the information is wrong, you can dispute it. Incorrect information can include the dates related to the debts or missed payments, the total amount owed, the account number, the creditor name, the borrower name and more.
When you dispute inaccurate information with a credit bureau, they typically pass along the dispute to the company that initially reported the data. That company usually has about 30 days to prove the details or the dispute can be settled in your favor and the charge-off can be removed from your credit report.
A charge-off can have enormous consequences for your credit for many years. If you’re dealing with a charge-off, you need to act quickly to resolve it. The sooner you start discussions about settling the problem, the less impact it might have on your overall credit.