Paying Charge Offs

What are Charge-Offs?

Charge-offs are non-paying loans or credit accounts that have been written off as losses. Merchants report the charge-offs to the credit bureaus.

To recover some costs, merchants typically sell these delinquent accounts to collection agencies. The collection agency pays the merchant a fraction of the value of your debt--usually about half of what you owe.

The collection agency then attempts to collect more than they paid for the account. The merchant no longer has an interest in the debt.

Once you pay a collection agency there is no incentive for the merchant to report your payment to the credit bureau.

If you can pay the entire balance, it is often to your benefit to pay the merchant directly. You can then contact the credit bureau to investigate the negative item. The credit bureau will contact the merchant. With a positive response from the merchant the credit bureau will remove the negative charge-off from your record.

You can often negotiate with a merchant to pay a major portion of your account and have them consider the account paid. Tell the merchant your honest financial situation and that you really want to pay what you can. If the merchant agrees, be sure the have the merchant report your account as "Paid as agreed" to the credit bureaus. Even statements such as "Paid" or "Settled" will go a long way on your credit report.

Even without your effort, charge-offs are typically dropped from credit reports after 6 or 7 years.

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