Paying a charge-off account?

Question

I recently had a car repoed. The band auctioned it off and I owe the deficiency balance. I have made arrangements with the bank to pay monthly payments on the balance, however, on my credit report it is listed as a 'charge-off'. Why do they list it as a charge-off since I am making payments? I thought a charge-off was a debt that was uncollectible, but my debt is being collected thru monthly payments. Also, I am wanting to buy a home soon, will this ruin my chances of getting a mortgage?

Answer 1

A charge off is an accounting entry for the accounts receivable portion for the company in this case the auto financing lender (bank).

They have to have some record of what has or hasn't been repaid for accounting and auditing purposes.

Don't be too concerned with buying a home just yet. One your credit is less than perfect due to the repo which is a major credit set back and you have the charge off on your report. It's gonna take at least 2 years to get back into the good graces of any future lenders. You'll need a min 650-680 credit score and min 5% downpayment.

Answer 2

they may be reporting it incorrectly i reccomend disputing it with the credit bureaus they have 30 days to verify it or they must delete it you may get lucky and get it deleted who knows

Answer 3

any time a debt goes 120 days past due a company can call it a charge off. once its paid it will be a paid charge off. it wont kill your chances at a mortgage but you will need a good letter of explanation for an FHA loan, a 2 year wait after the date of charge off and it will need to be paid. you will need a 580 credit score and 2.7% down for an fha loan.

Answer 4

When a consumer becomes severely delinquent on a debt (often at the point of six months without payment), the creditor may declare the debt to be a charge-off. It will then be listed as such on the debtor's credit bureau reports (Equifax lists "R9" in the "Status" column.) It is one of the worst possible items to have on your file. The item will include relevant dates, and the amount of the bad debt.

A charge-off is considered to be "written off as uncollectable." A major reason for this involves taxes. Every year, corporations file a Profit And Loss Statement with the Internal Revenue Service. It is also made available to federal and state regulators, and to shareholders. All of the year's bad debts (individual charged-off accounts) are added together as an item in the "Loss" section of the P & L Statement, and are deducted from the corporation's tax return, much like other business expenses. To banks, bad debts and even fraud are simply part of the cost of doing business.

However, the debt is still legally valid, and the creditor can attempt to collect the full amount. This includes contacts from internal collections staff, or more likely, an outside collection agency. If the amount is large (generally over $1500 - $2000), there is the possibility of a lawsuit.

Paying an old charge-off will not remove it from your credit reports. It will simply be updated to a "Paid Charge-Off," which, while slightly better, is still a seriously derogatory item.

As per the Fair Credit Reporting Act, a charge-off, whether paid or not, can remain on a consumer's credit reports for up to seven years. The time limit is based on the date of the original delinquency (i.e. when the debtor missed a payment and never again became current), not the date of the last activity. Thus, post-charge-off payments should not "re-start the clock."

Some debtors may be able to negotiate with the creditor to have the item removed from the consumer's credit reports in exchange for partial or full payment. This must be done directly with the creditor, not with an outside collection agency. The chances of success may depend on the amount of the debt and settlement offered, the age of the item, and the particular creditor's policies. If you attempt this, do everything in writing (keeping copies), and be sure that the individual you are dealing with has the authority to grant your request. Remember that your payment is your leverage, and get a clear, valid, written agreement before you pay. If you have already paid without a written agreement, then the creditor will have no motivation to do you any favors.

Answer 5

charge off is when a the owner, orignaly credtior, sends the account to collections.

it will still remain charged off till paid in full or settled. theres no way to change this