What Happens When a Credit Card Gets Charged Off

A charge-off means the card issuer has stopped trying to collect and sold your debt to someone else

When a credit card account is charged off, the bank or credit card company has decided you are not going to pay and has written off the debt as a loss on their books. This usually happens after you have missed payments for 180 days (about six months) in a row. The charge-off itself does not erase what you owe — it just means the original creditor has given up on collecting from you directly and may sell your debt to a debt collection agency or keep it in-house for collection efforts.

A charge-off is a serious mark on your credit report and will damage your credit score significantly. It stays on your report for seven years from the date of the first missed payment that led to the charge-off. Even after the seven years pass and it falls off your report, you may still legally owe the debt, depending on your state's statute of limitations.

Key Takeaways

• A charge-off happens after roughly six months of missed payments and means the card issuer has stopped trying to collect from you directly.
• The debt does not disappear when an account is charged off — you still legally owe it, and it may be sold to a debt collection company.
• A charge-off will lower your credit score by 100 points or more and remains visible on your credit report for seven years.
• You can still be sued for the debt after a charge-off, and a judgment against you can lead to wage garnishment or bank account levies in many states.
• Paying off a charged-off debt or negotiating a settlement can stop collection calls, though the charge-off itself will remain on your credit report.

How the charge-off process actually unfolds

The path to a charge-off starts with a missed payment. Most card issuers will contact you after 30 days past due. They will call, send letters, and may increase your interest rate. At 60 days past due, the account is typically reported to the three credit bureaus (Equifax, Experian, and TransUnion) as delinquent. At 90 days past due, many issuers will close the account and stop allowing new charges.

By 120 days past due, the card company usually assigns the account to an internal collections department or a third-party debt collector. At 180 days past due — the six-month mark — the issuer charges off the account. This is an accounting action, not a legal one. The bank records the debt as uncollectible and takes a tax write-off for the loss. Your account status changes to "charged off" on your credit report, and collection efforts may intensify rather than stop.

Some card issuers keep charged-off accounts in-house and continue collection attempts themselves. Others sell the debt to a debt buyer — a company that purchases old debts for pennies on the dollar and then tries to collect the full amount. You may receive collection calls from the original creditor, a debt collection agency, or multiple agencies if your debt is sold more than once.

The immediate damage to your credit score

A charge-off will cause a sharp drop in your credit score. The exact amount depends on your score before the charge-off, but most people see a decline of 100 to 150 points or more. If you had a good credit score (700 or higher), the damage is often steeper than if you already had a lower score.

The charge-off affects your credit report in two ways. First, it shows up as a negative account status. Second, it represents a pattern of missed payments leading up to the charge-off, and those missed payments are also recorded on your report. Together, these signal to future lenders that you stopped paying a debt, which makes you a higher-risk borrower.

The impact on your score is heaviest in the first two years after the charge-off. After that, the damage gradually lessens, though the charge-off remains visible for the full seven years. By year five or six, if you have made all other payments on time, your score may recover somewhat — but the charge-off will still be there for lenders to see.

Whether you still legally owe the debt

Yes, you still owe the debt after a charge-off. The charge-off is an accounting decision by the creditor, not a legal forgiveness of the debt. You remain legally responsible for the full balance, plus any interest and fees that have accumulated.

However, there is a time limit on how long a creditor or debt collector can sue you for the debt. This limit is called the statute of limitations, and it varies by state — typically between three and ten years from the date of the first missed payment. Once the statute of limitations has passed, a debt collector can no longer file a lawsuit against you, though they may still contact you asking for payment.

If a debt collector sues you before the statute of limitations expires and wins a judgment, they can then pursue collection methods like wage garnishment (taking money directly from your paycheck) or bank levies (freezing and taking money from your bank account). The rules for these actions vary significantly by state, so it is worth knowing your state's laws if you are facing a charged-off debt.

What happens after the charge-off: collection calls and lawsuits

After your account is charged off, collection activity often increases rather than decreases. If the debt is sold to a debt collection agency, you will likely receive calls and letters from that agency. These calls can be frequent and persistent, though federal law (the Fair Debt Collection Practices Act) limits when and how often collectors can contact you. They cannot call before 8 a.m. or after 9 p.m. in your time zone, and they cannot contact you at work if your employer prohibits it.

You have the right to send a written request asking the debt collector to stop contacting you. Send this letter via certified mail with return receipt requested. Once the collector receives your letter, they must stop calling — though they may still pursue other collection methods like filing a lawsuit.

A debt collector can sue you for the charged-off debt if the statute of limitations has not expired in your state. If they win the lawsuit, they receive a judgment, which is a court order stating you owe the debt. With a judgment in hand, they can pursue wage garnishment, bank levies, or liens on your property, depending on what your state allows.

Settling or paying a charged-off debt

You can negotiate with the debt collector or the original creditor to settle the debt for less than the full amount owed. This is called a settlement. For example, if you owe $5,000, a collector might agree to accept $2,500 as full payment. Settlements are common because debt collectors know that getting something is better than getting nothing.

Before you pay anything, get the settlement offer in writing. The agreement should state the amount you will pay, the date by which you must pay it, and that the debt will be considered settled in full once you pay. Without this in writing, a collector could claim you still owe the remaining balance after you pay.

Paying off or settling a charged-off debt will stop collection calls and prevent future lawsuits. However, it will not remove the charge-off from your credit report. The charge-off will remain for seven years, though your credit report will show that the account has been paid or settled, which is better than showing it as unpaid. Over time, this helps your credit score recover.

How a charge-off affects your ability to borrow

A charge-off makes it much harder to borrow money. Most traditional lenders — banks, credit unions, and major credit card companies — will deny your application if you have a recent charge-off on your report. Some may consider you after three to five years have passed since the charge-off, but terms will be less favorable than they would have been without it.

You may still be able to get a credit card, but it will likely be a secured card that requires a cash deposit, or a subprime card with a high interest rate and annual fee. Auto loans and mortgages are harder to obtain with a charge-off, though some lenders will work with you if enough time has passed (usually three to seven years) and you have rebuilt your credit in the meantime.

Some employers and landlords also check credit reports as part of their screening process. A charge-off could affect your ability to rent an apartment or, in some cases, get hired for certain jobs, particularly those involving financial responsibility.

Frequently Asked Questions

Can a charge-off be removed from my credit report before seven years?

A charge-off can only be removed if it is inaccurate. If the charge-off is correct, it will remain for seven years from the date of the first missed payment. You can dispute it with the credit bureaus if you believe there is an error, but simply paying the debt does not remove it. Some people negotiate a "pay for delete" agreement with the debt collector, where the collector agrees to remove the charge-off in exchange for payment, but this is not may provide and not all collectors will do it.

Will paying off a charged-off debt improve my credit score right away?

Paying off a charged-off debt will stop collection activity and prevent lawsuits, but it will not immediately boost your score. Your credit report will show the account as paid or settled, which is better than unpaid, and this will help your score recover gradually over time. The charge-off itself will still be visible on your report for the full seven years.

What is the difference between a charge-off and a write-off?

A charge-off is what the creditor does when they stop trying to collect — it is an accounting entry on their books. A write-off is similar but is sometimes used more broadly to describe any debt the creditor has decided is uncollectible. In practice, the terms are often used interchangeably, and both mean you still owe the debt even though the creditor has given up on collecting it.

Can I be sued for a charged-off debt after the statute of limitations expires?

No, a debt collector cannot file a lawsuit after the statute of limitations has expired in your state. However, they can still contact you and ask for payment. If you make a payment or acknowledge the debt in writing, you may restart the statute of limitations clock in some states, so be careful about what you say to collectors if the statute of limitations is about to expire.

What should I do if a debt collector is calling about a charged-off debt?

Document all calls and keep records of what the collector says. If they are violating the Fair Debt Collection Practices Act — calling outside allowed hours, calling repeatedly, or using abusive language — you can file a complaint with the Consumer Financial Protection Bureau or your state's attorney general. You can also send a written cease-and-desist letter via certified mail asking them to stop calling, though this does not stop them from suing you if the statute of limitations has not expired.