• A charge-off occurs when a creditor writes off a debt as unlikely to be repaid, typically after several months of missed payments.
  • The reclassification doesn’t mean the debt is forgiven. It is still owed by the borrower, and collection efforts often continue. 
  • Charge-offs reported to the credit reporting agencies remain on credit reports for up to seven years and can lower credit scores.
  • Paying or settling a charge-off does not remove it from a customer's credit report, but may reduce its negative impact.
  • Charge-offs and collections are related but separate entries that may both appear on a credit report, as applicable.
  • Borrowers have the right to dispute inaccuracies and may negotiate with creditors to resolve charged-off accounts.

Seeing a charge-off on your credit report can be frustrating, especially if you're unsure what it means or how it got there. A charge-off happens when a lender marks a debt as unlikely to be collected, usually after several months of missed payments. It doesn’t erase the debt, but it does create long-term credit consequences.

Let’s take a closer look at exactly what a charge-off means, how it may affect your credit score, and the steps that may help you move forward.

Understanding Charge-Offs

A charge-off is an accounting action that allows a creditor to declare a debt as a loss on their financial records. This typically happens after 120 to 180 days of missed payments.

The reclassification doesn’t mean the debt is forgiven. Charge-offs may be collected either by the original creditor or a third-party debt collector.

In many cases, a charged-off account is reported to the credit bureaus. It’s considered a serious negative entry and may remain on a credit report for up to seven years from the original delinquency date.[1]

Common Reasons for Charge-Offs

Extended patterns of nonpayment often occur when customers face unexpected or unmanageable financial strain. This may be caused by job loss, large medical expenses, or other hardships. Charge-offs may also occur after a customer repeatedly ignores or avoids a creditor's payment requests. 

Effect of Charge-Off on Credit Scores

Once reported, a charge-off becomes a major derogatory mark on your credit report. Even if you later pay or settle the debt, the charge-off notation may stay on the report for up to seven years from the original date of nonpayment.

The presence of a charge-off can lower your credit score, especially if the rest of your credit history is limited or already includes other negative marks. Lenders typically view charge-offs as a red flag, signaling that lending to you is an increased risk. This may make it harder to qualify for new credit, secure favorable interest rates, or even get approved for rentals or insurance.

Over time, the impact of a charge-off on a credit score may lessen, particularly if no new negative information is added and you’ve established positive credit habits. However, the account remains visible to potential lenders and may continue to influence their decisions for up to seven years.

How To Mitigate the Negative Impact

While you're unlikely to be able to remove a valid charge-off, there are some steps that may reduce the negative impact on your credit score:

  • Pay off the balance: Satisfying the full amount owed may show lenders the account was resolved, even if it was paid late.
  • Negotiate a settlement: If the full balance isn’t manageable, some creditors may accept a partial payment in exchange for closing the account.
  • Dispute inaccuracies: If there are errors in how the charge-off is reported, file a dispute directly with the lender or the credit bureau to have the information corrected or removed.
  • Focus on rebuilding: Establish new accounts, make timely payments, and reduce credit utilization. Positive activity may help offset older negative marks over time.
  • Monitor your credit: Keep track of credit reports to confirm that resolved charge-offs are updated accurately and to watch for any new issues.

Charge-Offs vs. Collections

When a lender charges off a debt, they close the account and record it as a financial loss. But that doesn’t end the collection process. The lender may still pursue repayment, or sell or assign the debt to a third party. Regardless of who holds the debt, the borrower remains responsible for resolving it.

Legal Consequences and Rights of Borrowers

Consumers have legal protections under the Fair Debt Collection Practices Act (FDCPA), which restricts how third-party collectors can operate. For example, collectors must provide written notice of the debt, identify themselves clearly, and avoid harassment or misleading claims.[2]

State law may limit how long a collector can file a lawsuit on old debt. This statute of limitations varies but often ranges from three to six years. After that period, the debt still exists but can’t be enforced through legal action.[3]

Borrowers also have the right to dispute inaccurate information on their credit report. If a charge-off or collection account contains errors, such as the wrong balance or dates, a formal dispute with the lender or the credit bureaus may lead to correction or removal.[4]

Managing Charged-Off Debt

While charge-offs stay on your credit report for up to seven years, that doesn’t mean you should ignore them. Making a good-faith effort to resolve the issue may help potential future creditors see you in a more positive light.

Paying off the full amount may have the greatest impact. However, if paying in full isn’t feasible, you may be able to settle the debt for less than the balance owed. The original lender or collection agency may also agree to a repayment plan, which may be more manageable than a lump-sum payment.

Before committing, ask for the terms in writing, including how the payments will be reported to credit bureaus.

Final Thoughts

While a charge-off may remain on your credit report for years, it doesn’t define your financial future. Taking the time to understand how this affects your credit and the steps you can take to minimize the impact may help put you in a stronger financial position going forward. With time, consistency, and informed decisions, you may rebuild your credit and regain stability.

Frequently Asked Questions

Should I pay off charged-off accounts?

Yes. The account is still your responsibility. Paying off a charged-off account can help reduce its long-term effect on your credit and may prevent further collection activity. While the charge-off remains on your credit report, a “paid” status is generally viewed more favorably than leaving it unresolved.

How serious is a charge-off?

A charge-off is a negative mark on a credit report. It signals that a lender considers the debt unlikely to be repaid and may lower your credit score. The entry may stay on your report for up to seven years, affecting future borrowing opportunities.

Can a debt collector sue you after a charge-off?

Yes. A charge-off doesn’t cancel the debt — it just means the lender has classified it as a loss for accounting purposes. If the debt is still within the statute of limitations in your state, the original lender or a third-party collection agency may file a lawsuit to recover the amount owed. It’s critical to respond to any legal notices regarding charged-off debt.

How do I make a payment?

PNC’s online payment portal for charged off accounts is located at PNC Repay a Charged-off Balance.