Charge-off

What It Means

A charge-off happens when a lender, after a stretch of missed payments, writes your account off as a loss in its own books and closes it to new charges. The debt doesn't go away: you're still legally responsible for it, and the lender may keep collecting, hand the account to a collection agencyDebt collectorA person or company that collects debts owed to someone else, such as a collection agency, debt buyer or collection lawyer, limited by the FDCPA. See more or sell it to a debt buyer. According to the credit bureausCredit bureauA company that collects information about how people use credit and sells it as credit reports; Equifax, Experian and TransUnion are the three nationwide ones. See more, a charge-off can stay on your credit reportCredit reportA record of how you've borrowed and repaid, kept by credit bureaus and sold to lenders, landlords, insurers and others who decide whether to deal with you. See more for up to seven years from the first missed paymentLate paymentA payment that reaches the lender after its due date; on credit reports, one that's 30 days or more past due. See more that led to it.

How People Say It

• "They charged off my old card, so I don't owe it anymore, right?"
• "There's a charge-off from 2022 on my report."
• "The collector bought the charged-off account."

The Breakdown

A short example. Kevin fell behind on a $2,400 credit card balance in 2024 and stopped paying. The bank charged the account off and later sold it to a debt buyer. When a collection letter arrives in 2026, Kevin throws it away, thinking a charge-off means the bank gave up and the debt was canceled.

Where it goes wrong. A charge-off is an accounting step on the lender's side. Equifax and Experian both say you're still legally obligated to pay. The account can now show twice on Kevin's report, once from the bank and once from the debt buyer, and the charge-off can stay until 2031, seven years from his first missed payment.

What to watch for

• Open every collection letter, and ask the collector for the validation information federal rules require.
• Check that the original account and the collection account show the same, correct first-missed-payment date.
• If you pay, the report should update to a paid charge-off or paid collection, but the seven-year clock doesn't restart.
• Keep records of any payment or settlement in writing.

Good to Know

The CFPB says negative information, including a charge-off, can generally be reported for up to seven years. Experian counts that from the first missed payment that led to the charge-off, which is why paying the account later changes its status to paid but doesn't reset the date it drops off. If you disagree with the balance or aren't sure the debt is yours, you can dispute it with the collector in writing and with the credit bureau that lists it.

Related Terms and Categories

• Debt collector

  A person or company that collects debts owed to someone else, such as a collection agency, debt buyer or collection lawyer, limited by the FDCPA.

• Late payment

  A payment that reaches the lender after its due date; on credit reports, one that's 30 days or more past due.

• Loan default

  Failing to repay a loan as the contract requires, usually after missed payments, which lets the lender use stronger ways to collect.

• Debt validation letter

  Either the notice a debt collector must send listing the debt and your rights, or the letter you send back disputing it or asking for proof.

• Statute of limitations on debt

  The state-set time limit for a creditor or collector to sue you over an unpaid debt; after it passes, the debt is called time-barred.

• Credit report

  A record of how you've borrowed and repaid, kept by credit bureaus and sold to lenders, landlords, insurers and others who decide whether to deal with you.

Debt and credit