The Fair Credit Reporting Act (FCRA) outlines the guidelines on charge offs and collections on credit reports. This includes how to handle a charge off, the steps to recover a charge off, and the procedures used for making a successful defense in a collection’s case. These guidelines were created by the Federal Trade Commission in order to provide consumers with the information they need to make wise decisions regarding their credit reports and credit portfolios. The FCRA outlines the rights that consumers have when it comes to charging off their accounts and collections. These rights include being given notice that you are charging or collecting a debt against them, a notice that the account is past due, that you intend to collection of the debt, and that if you do so, you will be charged additional fees.
Every time that a creditor fails to pay you on an account, the creditor must give you a written statement saying that you are past due and that you are now responsible for the entire amount of the debt. It is important that the statement also gives you the right to a written settlement agreement between you and the creditor. In addition to a written agreement, you must also give the creditor the opportunity to agree to delete any information from your credit reporting records about the charge off or collection.
The Fair Credit Reporting Act allows you to dispute charges on your credit reports if you find that they are inaccurate, misleading, or not correct. A charge-off occurs when a creditor files a complaint with the credit bureaus about an account being opened, unpaid, or charged off but then paid again within 30 days. You can dispute these charges yourself, by writing a letter to the credit reporting agency, or both. However, a charge-off will stay on your credit report until you resolve it. In addition, if the creditor goes to court or attempts to collect the debt from you, the charge-off remains on your credit report as a permanent account.
What if I cannot pay my debt? If you cannot pay a charge-off, what do you do next? Charge-offs generally remain on your credit report for up to seven years (the time it takes to clear the debt), at which point it is removed entirely. However, some creditors are lenient and may allow you to settle the debt for a fraction of what you initially owed, thus enabling you to pay it off faster.
Can I sell my charge-off to a third-party collection agency? You can contact collection agencies directly to buy a charge-off, but this is not recommended. Collection agencies make a lot of money by buying bad debts, and even legitimate charge offs, and many lenders do not want to deal with collection agents. If the collection agency sold your charge-off to a third-party agency, the lenders may investigate and ultimately repossess the bad debt, which is why it’s often a good idea to settle the debt yourself.
Can I still charge on my accounts after a charge-off is removed from my credit report? Unfortunately, it is not uncommon for people with charge-offs to try to charge for consumer credit accounts. While this can be legal under certain circumstances, such as when a charge-off is on your record because of a bankruptcy, you may end up getting caught in an investigation for charging on accounts. In extreme cases, you could be sued for charging on accounts even if you did not charge on the account.
Can I pay a charge off to remove a bad debt from my credit report? You can contact collection agencies directly to purchase a charge off; however, this is not recommended. Collection agencies make a lot of money by buying bad debts, and even legitimate charge-offs, and so, if the collection agency sells your charge off to a third-party agency, the lenders will investigate and eventually repossess the bad debt. In extreme cases, you could be sued for charging on accounts even if you did not charge on the account. Before making a decision to pay a charge off, you should always make sure that the creditors have agreed to the sale. If they have not, this may indicate that the collection agency has pressured them into signing the document allowing you to pay the charge off.
What can I do to improve my score with charge offs? The most important step to take is to begin paying all your bills on time. This alone can boost your score with credit reporting agencies. If you find yourself struggling to make your monthly payments, contact a consumer credit counseling service or a lender specializing in bad debt settlements to help get you back on track.