capital one credit card
Just after six months of no payments, the credit card issuer has to "clean up its books". So it performs an accounting function and "charges off" your debt. The assumption is the fact that, immediately after six months of no payments, you might be probably not going to spend this debt. So this loan needs to be removed in the bank's assets. This is a charge off.
Charge off surely does not mean that your debt has been wiped out, forgiven and no longer exists. To the contrary, it signifies your economic life is about to have worse.
When the credit card issuer charges off your debt, it most likely will be transferred to a collection agency. It will not matter if the bank transferred the debt towards the collection agency or sold it towards the collection agency. In either case the collection agency is now in charge of the debt. Calling the bank to work something out is now a moot point. You no longer exist within the bank's view!
The debt collector has to work within the law; the Fair Debt Collection Practices Act. The debt collector is permitted to contact you and write you to gather the debt. Right after all, you nevertheless owe it! You could inform the collector to cease calling and cease writing. But that will not mean the collection agency is not operating behind the scenes to decide for those who have a paycheck or assets to go following. Your charged off debt is often valid to purse till you pay it off.
Your credit report has currently taken a hit. Your credit score dropped at 30 days late, 60 days, 90 days and 120 days. As soon as you reach the 180 day mark and your debt is charged off, the debt becomes reported as "Charged Off." This notation remains on your credit report for seven years from the first missed payment's due date.
In line with MyFICO.com, around 35% of a credit score is based upon payment history. So possessing a charge off seem on our credit reports includes a main effect on our credit score for years and years!
If you do pay off a charged off debt, your credit report will show "Charged Off - Paid". Obviously this looks far better than just showing as charged off. But this nevertheless remains on your credit report for seven years in the initially delinquency.
I hope this clears up the confusion on the market about what a charged off debt is. It can be not forgiven. It is actually nevertheless a valid debt. It can be collected. And it can impact your credit score for many years. "Charge Off" is just not a pleasant phrase!