What Does It Mean to Have Credit Card Debt Charged Off?

If you have charged off credit card debt, you may be unsure what it means and what to do next. Charged off debt occurs when you are significantly behind in payments and the bank writes the debt off as bad debt on its records. It does not mean that you no longer owe the debt, however. When this happens, your charging privileges are revoked.

What Is Charged Off Debt?

Charged off debt is a debt that is no longer an asset for the company but has instead become a liability. The debt will still need to be repaid, or it will end up in a collection department, and you could be sued for the balance. Charge offs usually occur once you are six months behind in payments.

What to Do if You Are Delinquent

If you are currently behind on your credit card bills, you have options to avoid a charge off. First, always keep contact with the creditor. Banks do not want to charge off debt and will help you with a solution. You can agree on a payment plan or reduce your interest rate. Having a debt charged off will affect your credit score since your account was not paid as agreed and the account was closed. Both will lower your score, so you want to avoid a charge off when possible. You can keep your account open by becoming current on the payments. This may mean an additional payment you must make each month on top of your minimum to get caught up.

What to Do after a Charge Off

If you have a credit card charge off, all is not lost. It will create a ding on your credit report, but there are a few things you can do to help. First, immediately call the credit card company and set up a payment plan. You do not want your debt sold to a collection agency, which can sue you or garnish your wages. Instead, keep it inside the lender who issued you the card. Once you have set up a plan to repay the debt, you can start to rebuild your credit. Your credit report will show both a closed account and a settled account or an account not paid as agreed. It is important to pay all of your other bills on time and keep balances low. If you have other credit cards, try paying them down because this charge off can affect how much you pay in interest to other creditors. If you don't have any other cards, it will be difficult to open a new account after a charge off. A great tool for you is a secured credit card. Anyone can open one, and everyone can be approved. It is reported to all three credit bureaus, so it is the same as a regular card except you have to put up collateral. You will be asked to make a deposit of a few hundred dollars into the company's savings account. This money will be returned to you at a later date if you pay your bill. If you don't pay, the deposit will be revoked.

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