If you have an unpaid debt that has been charged off, don’t breathe a sigh of relief, thinking this means your debt has been forgiven. A charge off is never a good thing. When a debt is charged off, this means it is a past due balance, usually six months old or more, that a lender counts as a business loss.
A charged off account will cause your FICO score to drop by several points. What’s more, this debt could be purchased by another company and the collections process will start all over again. A charge off could cause a lender to deny you credit or a loan. In addition, this account will stay in your credit reports for seven years. However, after this time it must be removed under the Fair Credit Reporting Act.
If you make an agreement with your creditor, you might be able to arrange a payment plan or lump-sum payment. Know that paying off the debt will not remove it from your report. You’ll have to make a written request. If the request is denied, ask the original creditor to list your account as “paid as agreed” or “account closed–paid as agreed.” Any other label is negative.
If your debt is past the statute of limitations for your state, you might not have to be concerned about being sued for the debt. Just keep in mind that the debt will stay on your credit report until it reaches the statute of limitations. In the meantime, you’ll have trouble obtaining credit and possibly getting a job until then.