What Happens When Your Credit Card Is Charged Off

A charge-off means your card issuer has given up trying to collect what you owe

When your 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 typically happens after you have missed payments for 120 to 180 days — usually around six months. The charge-off itself does not erase what you owe; it is an accounting move the lender makes, not a legal forgiveness of the debt.

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 charge-off appears, the debt itself does not disappear — the lender can still pursue collection, sell the debt to a collection agency, or in some cases sue you for the money.

Key Takeaways

• A charge-off happens after roughly six months of missed payments and means the lender has stopped trying to collect from you directly.
• You still legally owe the debt after a charge-off, and the lender can sell it to a collection agency or take you to court.
• A charge-off damages your credit score and remains on your credit report for seven years from the first missed payment.
• If you receive a settlement offer from the lender or a collection agency, get any agreement in writing before paying.
• Paying off a charged-off debt does not remove it from your credit report, but it may stop collection calls and legal action.

How the charge-off timeline works

Your account does not go straight from current to charged off. Most card issuers follow a standard progression. After your first missed payment, your account is marked as 30 days past due. At 60 days past due, the lender typically increases collection efforts — you will receive more calls and letters. By 90 days past due, many issuers begin reporting the account to the three major credit bureaus (Equifax, Experian, and TransUnion) as seriously delinquent.

Between 120 and 180 days past due, the lender makes the charge-off decision. The exact timing varies by lender and state law, but 180 days (six months) is the most common threshold. Once charged off, your account status changes on your credit report to "charged off" or "written off." At this point, the lender may close your account, stop sending monthly statements, and either keep the debt in-house for collection or sell it to a third-party collection agency.

What a charge-off does to your credit score

A charge-off is one of the most damaging items that can appear on your credit report. Your credit score will typically drop 100 to 150 points or more, depending on your score before the charge-off and how many other negative marks you have. The damage is heaviest in the first few months after the charge-off appears, but the account will continue to hurt your score throughout the seven-year reporting period.

The impact lessens over time — a charge-off from five years ago will damage your score less than one from last month. However, the charge-off will still be visible to lenders and will make it harder to get approved for new credit cards, loans, or mortgages during that seven-year window. Some lenders will deny you outright; others will approve you but at higher interest rates because they see you as higher risk.

The difference between a charge-off and debt forgiveness

A charge-off is not the same as the debt being forgiven or erased. The lender has written it off for tax purposes on their end, but you still legally owe the money. The statute of limitations for collecting the debt varies by state — typically between three and six years — but a charge-off does not reset that clock or make the debt disappear.

If the lender or a collection agency sues you within the statute of limitations and wins, they can pursue wage garnishment, bank levies, or liens against your property, depending on your state's laws. Even after the statute of limitations expires, the charge-off remains on your credit report for the full seven years. The debt becomes uncollectable in court after the statute runs out, but the credit damage persists.

When the lender keeps the debt versus selling it

After a charge-off, the lender has two main options: keep the account and pursue collection themselves, or sell the debt to a collection agency. Large banks often sell charged-off credit card debt to third-party collectors because they can recover some money immediately, even if it is only cents on the dollar. Smaller lenders or credit unions may keep the debt and continue collection efforts in-house.

If your debt is sold, you will likely receive a notice from the collection agency within a few weeks. The collection agency now owns the right to collect the debt and will contact you by phone, mail, or both. You may also see the collection account appear on your credit report as a separate negative item, in addition to the original charge-off. This can further damage your credit score in the short term, though it is the same underlying debt.

Your options if your account is charged off

You have several paths forward, depending on your situation and what you can afford. The first is to pay the full balance if you are able to do so. Paying in full stops collection calls and eliminates the risk of being sued. However, paying does not remove the charge-off from your credit report — it will still show as "charged off" or "paid charge-off," which is still negative but slightly better than an unpaid charge-off.

The second option is to negotiate a settlement. The lender or collection agency may accept less than the full amount owed — often 40 to 60 percent of the balance — to close the account. Always get a settlement offer in writing before you pay anything. The written agreement should state the exact amount you will pay, the date it is due, and that the debt will be considered settled once you pay. Without this, the collector may claim you still owe the remainder.

A third option is to do nothing if you cannot afford to pay and the statute of limitations in your state has expired. Once the statute of limitations passes, the debt becomes uncollectable in court, and collectors cannot sue you. However, they can still contact you and report the debt to credit bureaus. The charge-off will remain on your report for seven years regardless.

How to handle collection calls after a charge-off

Once your account is charged off, collection calls often increase. You have legal rights under the Fair Debt Collection Practices Act (FDCPA), a federal law that limits what collectors can do. Collectors cannot call before 8 a.m. or after 9 p.m. in your time zone, cannot call your workplace if your employer prohibits it, and cannot harass you with repeated calls or threats.

You can send a written request to the collector asking them to stop contacting you. Send it by certified mail with return receipt so you have proof. Once they receive your letter, they must stop calling, though they may still pursue other collection methods like lawsuits or reporting to credit bureaus. If a collector violates these rules, you can file a complaint with the Consumer Financial Protection Bureau (CFPB) or consult with a consumer protection attorney about your options.

Frequently Asked Questions

Can I get a charge-off removed from my credit report?

A charge-off will remain on your credit report for seven years from the date of the first missed payment. You cannot have it removed early just because you paid it. However, you can dispute it if the information is inaccurate — for example, if the lender reports the wrong balance or the wrong date. Contact the credit bureau in writing with documentation of the error.

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

Paying off a charged-off debt will stop collection efforts and prevent lawsuits, but it will not remove the charge-off from your credit report or immediately boost your score. Over time, as the charge-off ages and you build positive payment history with other accounts, your score will gradually recover. A paid charge-off is viewed slightly more favorably than an unpaid one, but both are negative.

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

A charge-off is the lender's decision to stop trying to collect and write off the debt. A collection account is what appears on your credit report when a third-party collector is pursuing the debt. You can have both on your report at the same time — the original charge-off from the lender and a separate collection account from the agency that bought the debt.

Can a collection agency sue me for a charged-off debt?

Yes, a collection agency can sue you for a charged-off debt as long as the statute of limitations has not expired in your state. The statute typically ranges from three to six years, depending on where you live and the type of debt. If they win the lawsuit, they can pursue wage garnishment or bank levies to collect. Check your state's laws or consult a local attorney to find out your statute of limitations.

Should I negotiate a settlement or pay the full amount?

That depends on what you can afford and your goals. Paying in full stops all collection activity and eliminates lawsuit risk, but it does not improve your credit report. A settlement for less money may be more realistic if you have limited funds, but get the agreement in writing first. If you cannot afford either option and the statute of limitations has expired in your state, the debt becomes uncollectable in court.