Q: A few years back, I had a credit card as well as a credit line with a store. I had an outstanding debt for some time, though I was eventually able to pay it. Now, on my credit report, those debts appear as “charged off.” This should not be possible. I paid them off! Is there anything I can do, or do I have to pay those debts again?
A: Many people don’t understand the jargon used in credit reporting and, as a result, can’t tell where they stand. What does “charged off” mean? The term refers to taking a delinquent account off a creditor’s books. Your original loan was an asset to the creditor. The loan was charged off as a loss when you got so far behind in payments that the accountants doubted you’d ever pay. You did pay, and that’s great. But that doesn’t change what already happened. At one point, your debt was charged off, and your credit report is accurate in reflecting that. It’ll show the charged-off debt for seven years from the date it first went into continuous delinquency.
Paying off the charged-off debt may not help your past, but it does help your future. First off, you will not have to pay again. Secondly, there is a lot you can still do to help your present and future credit.
Your credit report is used in many ways. It can help decide whether to loan you money, rent you an apartment, hire you at a new company, promote you at an existing job, or issue you an insurance policy. Your report, like millions of others, has a blemish on it. But since most of us make mistakes or hit a rough patch in life from time to time, this isn’t the end of the world.
Your particular blemish can’t be erased until seven years pass, but it can be covered over. You can add positive information to your credit report which, along with the passage of time, will offset any negative effect.