How do I remove a charge-off from my credit report?

You cannot remove a charge-off from your credit report unless the information listed is incorrect. If the entry is an error, you can file a dispute with the three major credit bureaus to have it removed, but the information will remain on your report for seven years if it is accurate.... read full answer

How To File a Dispute To Remove a Charge-Off From Your Credit Report

1. Review your credit report to locate the charge-off account.
2. Investigate the entry to confirm it is inaccurate.
3. Choose a dispute method (online, phone or mail) if the information is not accurate.
4. File your dispute via the chosen method.
5. Wait for the results (30 to 45 days).

If the information is correct and you pay off the outstanding debt, you can then ask the lender via phone or in writing to make a goodwill adjustment, removing the derogatory mark from your credit report. Although the lender is under no legal obligation to do so, goodwill requests are successful in many cases.

Note, the lender may also sell your debt to a collection agency, if it remains unpaid. The agency has the right to pursue further legal action against you.

You can check your credit report for free and also access personalized tips on how to improve your score here at WalletHub.

It’s better to pay off your credit card than to keep a balance because paying the card off will save you money on interest. Credit card companies charge interest when you don’t pay your bill in full every month, but you’ll enjoy a grace period with no interest if you always pay your full statement balance by the due date.... read full answer

Some people think you need to carry a balance in order to see positive information on your credit report, but that’s simply not true. You don’t even need to use your credit card to build credit. Simply keeping an account open and in good standing is enough to help your credit.

Here’s why it’s better to pay off your card than to carry a balance:

• If you pay your bill in full each month, you won’t be charged any interest on most credit cards, thanks to a grace period. But you’ll lose the grace period if you don’t pay in full one month, and you’ll have to pay your entire balance for two consecutive billing cycles to get it back.
• You don’t need to carry a balance for a credit card to help your credit score. What matters most for credit building is meeting due dates and keeping credit utilization low.
• Paying your bills on time doesn’t require you to pay your balance in full each month. You just have to make the minimum payment listed on your statement. But if you take on too much debt, you may find it hard to make your monthly payments.
• Carrying a balance makes it harder to keep your credit utilization low, since your everyday spending will be added on top of the amount you’re carrying from month to month. It’s best to use less than 30% of the credit made available to you.

So, to recap, it’s better to pay off your credit card than to carry a balance because it builds your credit history just as well without subjecting you to interest charges. Just remember, not carrying a balance does not mean you have to stop using your credit card. There is a middle ground. A balance will be listed on your credit card statement whenever you make purchases, but if you pay that amount by the due date, you won’t really be carrying a balance.

Using your card regularly actually helps because having a credit utilization ratio between 1% and 10% is slightly better for your credit score than 0%. But credit utilization is based on your statement balance, and your monthly statement comes before the due date. So you can still pay your bill in full every month while doing right by your credit score.

Why 0% APR credit cards are an exception

During the 0% APR introductory period, your balance – whether from a purchase or balance transfer – won’t accrue interest as long as you pay the minimum amount required by the due date each month. So, keeping a balance is expected, but you do have to make monthly payments along the way. And if you don’t pay in full by the end of the 0% period, interest will come into play.

That said, if you’ve got some credit card debt you’d like to get rid of, a 0% balance transfer credit card could help you save a lot of time and money. And if you’re trying to improve your credit, WalletHub’s free daily credit scores and credit analysis can get you on track.

A charge-off will stay on your credit report for seven years from the date your original delinquency is reported to the credit bureaus. This seven-year timeframe stays the same whether or not your lender turns your account over to a collection agency or continues to handle your debt.

While you cannot remove a charge-off from your credit report before seven years have passed, the damage to your credit score does not have to last as long. Some credit-scoring models, such as FICO Score 9, do not factor paid collections into credit score calculations. So, if your charged-off debt is turned over to a collection agency and you pay the amount due, you could see improvement in your credit score once that debt is no longer factored in. Even if your credit scoring model does include paid collections, there are still a few steps you can take to improve your credit score.... read full answer

How to Improve Your Credit Score After a Charge-Off

• Build a positive payment history. Payment history typically counts for 35% to 40% of your credit score, depending on the model, so timely payments can help get your score back to its pre-charge-off level. As a result, we recommend setting your accounts up for auto-pay and reading our tips for avoiding missed due dates.
• Limit your applications for new credit. Using credit wisely is one of the best ways to rebuild your credit, but too many credit applications (resulting in hard inquiries) in a short period of time can cause your credit score to drop. So, do some research on the best credit cards for your credit profile and check out the Offers page of your free WalletHub account for personalized recommendations. Then, submit one application when you’ve found the right card. If you don’t get approved the first time, consider applying for a secured credit card with no credit check.
• Reduce your credit utilization. Credit utilization is a big contributor to your overall credit score, so if you can reduce your utilization ratio, you can see credit improvement. You can reduce your credit utilization ratio by gradually paying down your debt, limiting your spending to essentials, and getting a credit limit increase.
• Dispute any inaccuracies on your credit report. Your credit score is calculated based on the contents of your credit report, so any errors (such as unauthorized inquiries or fraudulent accounts) could be weighing your credit score down. That’s why you should make a habit of checking your credit report often and filing a dispute for any inaccurate or fraudulent items.

While charge-offs remain on your credit report for seven years, you can start working on improving your credit score right away. Visit the Credit Analysis page of your WalletHub account for custom advice, and check the status of your accounts on the Credit Report tab (updated daily).