A charge-off is an accounting action a creditor takes when it concludes an account is unlikely to be repaid. But it does not mean you no longer owe the debt.
Federal banking regulators require creditors to charge off closed-end loans, such as car loans, at 120 days past due, and revolving credit, such as credit cards, at 180 days past due, under the interagency Uniform Retail Credit Classification and Account Management Policy. At that point, the creditor removes the account from its books as a loss for accounting purposes and typically closes it to further charges.1
A charge-off does not erase the debt or your obligation to pay it. The creditor can continue trying to collect the balance directly, or it can sell the debt to a third-party debt buyer or assign it to a collection agency, either of which can then attempt to collect the same amount. You’re still legally responsible for the balance after a charge-off, even though the original creditor has stopped counting it as an asset internally.
| Stage | What happens |
|---|---|
| First missed payment | The account becomes delinquent. The date of this first delinquency starts the credit reporting clock. |
| 120 days past due | Closed-end loans, such as car loans, are charged off. |
| 180 days past due | Revolving credit, such as credit cards, is charged off. |
| After charge-off | The creditor may keep collecting, sell the debt to a debt buyer, or assign it to a collection agency. You still owe the balance. |
| Up to 7 years after first delinquency | The charge-off can remain on your credit report until this point. |
Sources: Federal Financial Institutions Examination Council, Uniform Retail Credit Classification and Account Management Policy (2000); Fair Credit Reporting Act, 15 U.S.C. § 1681c.
What should you do if an account is charged off?
1. Find out what happened to the debt. Has it been assigned to a collection agency? Sold to a debt buyer? Is additional collection activity coming?
2. Confirm the current balance and date you first became delinquent. If a collector contacts you, make sure the debt and the amount are accurate.
Should you pay a charged-off account?
It depends on your situation, including:
- How old the debt is
- Whether the balance is accurate
- Who owns the debt
- Whether a lawsuit is possible
- How payment or settlement would be reported
In some states, a payment on older debt can have legal consequences, such as restarting the time period a collector has to sue, so be careful with any accounts that have been delinquent for several years.2
You can ask the creditor or collector whether they will accept less than the full balance, but be sure to get any agreement in writing.3 A settled account generally remains permanently resolved once the settlement is fully paid. A settlement still being paid in installments can be voided if the payments stop before it is finished.
How does a charge-off affect your credit?
A charge-off shows up on a credit report as a negative account status. Under the Fair Credit Reporting Act, it can remain on a credit report for up to seven years, measured from the date the account first became delinquent rather than the date it was formally charged off.4,5
If you pay the balance after a charge-off, that changes how the account is reported, typically to “paid charge-off,” but it doesn’t remove the entry or restart the seven-year clock.5
Because a charge-off is a bookkeeping classification rather than a legal resolution, it’s possible for the same underlying debt to show up more than once on your credit report: once from the original creditor as a charge-off, and again from a collection agency or debt buyer that later acquired it.
| How it’s reported | Do you still owe the balance? | How long it can stay on your report |
|---|---|---|
| Charged off | Yes | Up to 7 years from first delinquency |
| Paid charge-off | No | Up to 7 years from first delinquency; paying does not restart the clock |
| Collection account from a collector or debt buyer | Yes, unless paid or settled | Up to 7 years from the original first delinquency |
Sources: Fair Credit Reporting Act, 15 U.S.C. § 1681c; Consumer Financial Protection Bureau, How long does information stay on my credit report?
The same reporting window applies if you settle the debt. A review of how each debt option affects credit found that a settled account commonly stays on a credit report for about seven years from the original delinquency date, the same clock that applies to the charge-off itself.
Does interest keep accruing after charge-off?
Sometimes. Federal debt collection rules say a debt collector may not collect interest or fees that aren’t authorized by the original credit agreement or permitted by law.6 But if the agreement or state law does authorize it, interest can continue to accrue after charge-off, even once a debt is sold to a new owner.
In practice, many creditors and debt buyers choose not to add post-charge-off interest at all, because courts are divided on whether collectors must disclose that interest is accruing, and getting it wrong can expose a collector to a Fair Debt Collection Practices Act claim.
If you’re contacted about a charged-off balance that’s larger than what you remember owing, it’s reasonable to ask the collector, in writing, exactly how the current amount was calculated.
Frequently asked questions
Do I still owe a debt after it’s charged off?
Yes. A charge-off is an accounting step the creditor takes, not a cancellation of the debt. The creditor, a collection agency, or a debt buyer can still try to collect the balance.
Does paying a charge-off remove it from my credit report?
No. Paying typically changes the status to “paid charge-off,” but the entry stays. It can remain for up to seven years from the date the account first became delinquent.4,5
How long after missing payments is a credit card charged off?
Credit cards and other revolving accounts are generally charged off at 180 days past due. Closed-end loans, such as car loans, are generally charged off at 120 days past due.1
Sources
1. Federal Financial Institutions Examination Council. (2000). Uniform retail credit classification and account management policy. Federal Reserve Regulatory Service. https://www.federalreserve.gov/frrs/guidance/uniform-retail-credit-classification-and-account-management-policy.htm
2. Consumer Financial Protection Bureau. (n.d.). Can debt collectors collect a debt that’s several years old? https://www.consumerfinance.gov/ask-cfpb/what-is-a-statute-of-limitations-on-a-debt-en-1389/
3. Consumer Financial Protection Bureau. (n.d.). How do I negotiate a settlement with a debt collector? https://www.consumerfinance.gov/askcfpb/1447/
4. Consumer Financial Protection Bureau. (n.d.). How long does information stay on my credit report? https://www.consumerfinance.gov/ask-cfpb/how-long-does-information-stay-on-my-credit-report-en-323/
5. Fair Credit Reporting Act, 15 U.S.C. § 1681c (requirements relating to information contained in consumer reports). https://www.law.cornell.edu/uscode/text/15/1681c
6. Consumer Financial Protection Bureau. (n.d.). 12 CFR 1006.22: Unfair or unconscionable means (Regulation F). https://www.consumerfinance.gov/rules-policy/regulations/1006/22/