Credit Repair---Old Charge-Off Strategy

Credit repair is mostly about paying debts on time and about getting credit limits paid down. There are, however, a number of other factors to consider when you are trying to fix your credit. Charge offs can be defined as debts that were not paid, and were eventually written off by the original creditor and sold to a collection agency. Once a collection agency has bought a charge off account, they will aggressively attempt to collect the debt, using collection tactics including persistent phone calls, letters, and in many cases settlement offers.

Obviously, you should make every attempt to meet your obligations and pay your bills on time. Unfortunately, with the current state of the economy, paying bills has become a major challenge to many hard working people. Once a credit card has gone unpaid for a certain amount of time--usually around 5 to 6 months---the card company will charge off the debt. Once you have a debt that charges off, you have that blemish on your credit for the next seven years.

Should you attempt to make payment arrangements or accept a reduced settlement offer from the collection company that buys your bad debt from the original credit card company?

Maybe. Keep this in mind: Once your credit card company has reported you 30, 60, 90, 120 days late and then reported the account as charged off, that is the worst they can do to your credit. It will remain there for seven years, but if you do a settlement, enter into a payment agreement and in some cases dispute the account, you run the risk of re-setting that seven year clock. Simply put, if you have charge offs on your credit report, you might want to consider trying to hold out until they fall off at the 7 year mark.

We in no way advocate not paying debt that you legitimately owe, but if you have a choice between making payment arrangements on an old charge off account and having the account update and remain on your report for another 7 years, or just holding out a bit longer until the original collection account reaches the initial 7 year mark, you might want to seriously consider waiting.

On the other side of the coin, having charge off accounts on your credit report, regardless of how old they are can prevent you from getting home and auto loans and can even prevent you from getting certain types of jobs. The main point is to be aware of the timetable and the potential negative affects of paying off old bad debt accounts as opposed to just letting them fall off at the seven year mark.

By Personal Financial Guide