When credit card users fail to make minimum payments on credit card balances within 180 days, credit card companies may close the account to prevent further charges. On a credit report, this action is recorded next to the account as "Charged Off."Continue Reading
Charging off an account allows a credit card company to report the remaining balance as a loss on company financial statements. This does not mean that credit card users are no longer responsible for paying the remaining balance. The credit card company, or a collection agency hired by the company, can attempt to recover monies owed. Once the account balance is paid, the updated notation next to the account may change to "Charged-Off Paid" or "Charged-Off Settled."
A charge-off can remain on credit reports for up to seven years. In some cases, credit card users may be able to negotiate with credit card companies to remove the notation once the balance is paid. "Charged-Off," "Charge-Off Paid" and "Charge-Off Settled" accounts may lower credit scores and make it more difficult to secure a loan or other lines of credit. Rebuilding credit by paying other credit card balances on time or securing a small loan and making regular payments can help improve credit scores over time.Learn more about Credit & Lending