Credit Card Charge-Offs: How to Avoid, Remove, or Repair Your Credit

Nicolas Cesare  | 

Getting a charge-off on your credit history is one of the the worst credit card mistakes that you can commit. A charge-off  occurs after you’ve failed to meet the minimum required payments from your credit card company after a long time. Usually this happens after 180 days (or six months) without payment.

The good news is that charge-offs are easily avoidable, making them a mistake that you don’t have to suffer through. If you haven’t received a charge-off yet, then there are options to avoid it altogether.

What is a Charge-Off?

Thirty days after the due date on your credit card bill, your credit card company will add a late payment notice to your credit report. This is something that you want to avoid whenever possible, but it’s not the worst that can happen.

If 180 days has passed from your due date and you still haven’t paid your balance to your credit card company, then a charge-off will be added to your credit history. A charge-off is different from a late payment notice in two ways:

  • The credit card company will treat it differently. Before the charge-off, they were counting your payments as revenue for the year. Now they’re putting your debt down as a loss in their books. However, this does not mean that you are in the clear! You are still expected to pay your credit card debt. A charge-off does not forgive debt.
  • A charge-off is much more severe than a late payment notice. Having a charge-off on your credit history will do more damage to your credit score, making it difficult to get loans and good credit card deals in the future. It can also mean losing access to your credit card account.

How to Avoid a Charge-Off

The best way to avoid a charge-off is to always pay your balance in full at the end of each month. This will keep you out of hot water with the credit card company and even improve your credit score, as you show that you can consistently pay off debt on time.

If paying your complete balance isn’t an option, make sure that you’re at least hitting your minimum payments each month. Getting these minimum required payments in will help you to avoid late fees and keep late payment notices off of your credit card.

If you find that you are unable to keep up with even your minimum monthly payments, then it’s time to reevaluate how you are using your card. Make sure that you are budgeting responsibly to keep your credit card spending within your means. If you have another authorized user on your account, talk to them about keeping their spending reasonable as well.

It’s difficult, but not impossible, to remove a charge-off from your credit report or work to repair your credit after taking a big hit.

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Nick Cesare is a writer from Boise, ID. In his free time he enjoys rock climbing and making avocado toast.