What is what does it mean when your credit card is charged off?

When a credit card is "charged off," it means the lender has written the debt off as a loss on their books. It doesn't mean you're off the hook for the debt. Here's what it entails:

• What is it? A charge-off is an accounting term a creditor uses when they determine that a debt is unlikely to be repaid. Usually, this happens after several months of non-payment, typically around 180 days.

• What it is not: It is not debt forgiveness. You still owe the money. The creditor may still attempt to collect the debt themselves, or they might sell it to a debt collector.

• Impact on your credit score: A charge-off has a very negative impact on your credit score. It signals to other lenders that you are a high-risk borrower. The effect will lessen over time, but it can stay on your credit report for up to seven years from the date of the first missed payment that led to the charge-off.

• What to do next: Even though it's a charge-off, explore your options:

  • Negotiate a settlement: Contact the creditor or debt collector and try to negotiate a payment plan or a lower settlement amount.
  • Check for errors: Review your credit report for inaccuracies related to the charge-off. Dispute any errors with the credit bureaus.
  • Understand Statute of Limitations: There's a legal limit (statute of limitations) on how long a creditor can sue you to collect a debt. This varies by state. Understand the rules in your state. Paying on the debt could restart the clock on the statute of limitations, giving the collector more time to take legal action.
  • Get professional help: If you're struggling with debt, consider seeking advice from a credit counselor or financial advisor.