A charge off is when your credit card company gives up trying to collect a debt you owe and writes it off as a loss on their books

A charge off happens when you stop paying your credit card bill for 180 days (six months) in a row. At that point, the card issuer removes the debt from their active accounts and records it as a loss. This does not erase what you owe — it just means the company has decided to stop pursuing collection efforts themselves. The debt still exists, and you are still legally responsible for it.

The charge off appears on your credit report as a separate negative mark, separate from the missed payments that led to it. It signals to future lenders that you defaulted on this account, and it stays on your report for seven years from the date of the first missed payment that started the chain. A charge off is one of the most damaging things that can happen to your credit score — typically dropping it by 100 points or more, depending on where your score started.

After a charge off, the card company may sell your debt to a third-party debt collector or collection agency. That collector then has the right to contact you and attempt to recover the money. You may also face a lawsuit if the debt is large enough, which could result in a judgment against you and wage garnishment in some states.

Key Takeaways

  • A charge off occurs after 180 consecutive days of non-payment and means the card issuer has written off the debt as a loss on their financial statements.
  • The charge off appears on your credit report for seven years from the date of your first missed payment, not from the charge-off date itself.
  • Your credit score typically drops 100+ points when an account is charged off, making it harder to borrow money or get approved for new credit.
  • Owing the debt does not stop after a charge off — the company may sell it to a collector who can sue you or pursue other collection methods.
  • Paying off a charged-off debt does not remove it from your credit report, but it does stop collection activity and improves your credit standing over time.

How the 180-day countdown works

The 180-day period starts the moment you miss your first payment. If your payment was due on the 15th and you do not pay by the end of that month, day one of the countdown begins. The card company will continue to report you as late — first 30 days late, then 60 days late, then 90 days late, and so on — with each milestone appearing on your credit report.

You do not have to miss every single payment for the entire six months. The clock resets only if you make a full payment that brings your account current. A partial payment or a payment that covers only interest does not stop the countdown. Many people make the mistake of thinking a small payment will reset the clock; it does not. The account remains delinquent, and the days continue to accumulate.

Once you hit day 180, the card issuer must charge off the account. Federal banking regulations require this — they cannot wait longer. At that moment, the account status changes from "severely delinquent" to "charged off," and the company typically stops accepting payments directly from you.

What happens to your credit score after a charge off

A charge off is reported to all three credit bureaus — Equifax, Experian, and TransUnion — as a separate account status. Your credit report will show the account as "charged off" and will list the date the charge off occurred. The missed payments that led to the charge off remain on your report as well, creating a pattern of delinquency that lenders see immediately.

The damage to your score depends partly on your starting score. If you had excellent credit (750+), a charge off might drop your score by 130 to 150 points. If your score was already lower (600-700), the drop might be 80 to 100 points. The impact is largest in the first few months after the charge off, then gradually lessens as time passes and newer, positive information accumulates on your report.

The charge off remains visible on your credit report for seven years, but its impact weakens significantly after three to four years. Lenders weight recent negative marks more heavily than older ones. A charge off from five years ago affects your score far less than one from six months ago, though it still counts against you.

Debt collection after a charge off

When an account is charged off, the card company has several options. Some issuers keep the debt in-house and continue collection efforts themselves. Others sell the debt to a third-party debt collector for a fraction of what you owe — often 5 to 10 cents on the dollar. The collector then owns the debt and has the legal right to pursue you for the full amount.

A debt collector will typically contact you by phone, mail, or email to demand payment. They may offer to settle the debt for less than the full balance — sometimes 30 to 50 percent of what you owe. These settlement offers are negotiable, and accepting one can stop collection calls. However, the settled amount may be reported to the IRS as forgiven income, which could create a tax liability.

If you do not respond to collection efforts and the debt is large enough, the collector may file a lawsuit against you. If they win a judgment, they can pursue wage garnishment, bank levies, or liens on property, depending on your state's laws. Some states are more protective of debtors than others, so the collector's options vary by location.

Paying off a charged-off account

Paying off a charged-off debt stops collection activity and prevents a lawsuit, but it does not remove the charge off from your credit report. The account will still show as "charged off" for the full seven years. However, paying it off does change the status to "charged off, paid" or "settled," which is viewed more favorably by lenders than an unpaid charge off.

Before you pay, get the agreement in writing. Contact the collector or the original card company and ask for a settlement offer or payment plan. Once you have an offer, request a letter stating that payment will resolve the debt and stop all collection activity. Do not send money without this agreement — some collectors will accept payment and continue pursuing you anyway.

If you are negotiating a settlement, ask the collector to remove the account from their records entirely in exchange for payment. Some will agree to this, though many will not. Even if they refuse, paying the debt is still worth doing to stop the legal threat and improve your credit standing over time.

The difference between charge off and default

A default is a broader term that means you have broken the terms of your credit agreement. A charge off is a specific type of default that occurs after 180 days of non-payment. You can default on a credit card in other ways — for example, by violating the card's terms and conditions — but a charge off is always a default caused by non-payment.

On your credit report, you will see both the default status and the charge-off status listed. The default appears first, showing the pattern of missed payments, and the charge off appears as the final status of the account. Lenders read both to understand the full history of what went wrong.

Rebuilding credit after a charge off

A charge off does not permanently destroy your credit, but rebuilding takes time and consistent action. The most important step is to stop accumulating new negative marks. Pay all current bills on time, every time, starting now. Even one on-time payment helps, and the effect compounds as months pass.

Consider a secured credit card if you cannot get approved for a regular card. These cards require a cash deposit that becomes your credit limit, and they report to the credit bureaus just like regular cards. Using one responsibly — keeping your balance low and paying on time — adds positive payment history to your report and gradually offsets the charge off.

Do not close old accounts or pay off all your balances at once if you are trying to rebuild. Credit scoring models reward a mix of account types and a low overall utilization rate (the percentage of your available credit that you are using). Closing accounts or paying everything off can actually lower your score temporarily.

Frequently Asked Questions

Can I get a loan or credit card with a charge off on my report?

Yes, but your options are limited and the interest rates will be higher. Subprime lenders and credit card companies that specialize in bad credit will work with you, though they may require a deposit or charge 20%+ interest. Most mainstream lenders will decline you until the charge off is at least three to four years old.

Does paying off a charge off improve my credit score?

Paying off a charged-off debt stops collection activity and changes the status to "paid," which lenders view more favorably. However, the charge off itself remains on your report and continues to affect your score. The improvement comes gradually as time passes and newer positive information accumulates, not immediately from the payment.

What is the difference between a charge off and a collection account?

A charge off is the card issuer's decision to write off the debt as a loss. A collection account is created when a debt collector takes over the debt and reports it to the credit bureaus. You can have both on your report — the original charge off from the card company and a separate collection account from the collector.

How long does a charge off stay on my credit report?

A charge off stays on your credit report for seven years from the date of your first missed payment, not from the charge-off date. After seven years, it must be removed by law. Its impact on your score weakens significantly after three to four years, even though it remains visible.

Can a debt collector sue me for a charged-off debt?

Yes. A charge off does not erase the debt or prevent a lawsuit. If the debt is large enough and you do not respond to collection efforts, the collector can file a lawsuit and potentially win a judgment against you. The statute of limitations for debt collection lawsuits varies by state, typically ranging from three to six years.