A credit card charge off means the credit card company no longer considers the debt to be an asset, although the debt is still owed. While no additional charges and, in some cases, no additional interest charges will be added to the account, the charge off status will be reported to credit reporting agencies and could impact your credit score. A charge off does not mean the delinquent cardholder doesn’t have to pay. After a charge off, who is trying to collect payment can change, though.

To avoid this negative effect, cardholders should ensure they are paying their debts. Still, there are ways to improve your credit after a charge off.

When Do Charge Offs Occur?

Charge offs typically occur after an individual has failed to make at least the minimum required payment on their credit card debt for at least 180 days. After that, the lender no longer considers the debt an asset, but won’t stop trying to collect; a charge off does not mean the delinquent cardholder doesn’t have to pay.

After a charge off, who is trying to collect payment can change, though. Many card issuers will first attempt to collect the debt themselves, but after a period of unsuccessful attempts they’ll often hire collection agencies or attorneys to collect on their behalf. In some cases, they may sell the debt. When debt is sold, its new owner may appear on your credit report along with the original issuer.

How Does a Credit Card Charge Off Affect My Credit?

Having a charge off on your credit report will appear on your credit for up to seven years. The cardholder has the right to pay off the debt at any point after charge off, upon which time the amount will convert from an “unpaid collection” to a “paid collection” on their credit report. Payment does not remove the charge off from the credit report, however.

Tips to Improve Your Credit

Again, a charge off usually remains on a credit report for seven years after being filed. During that time — as far as the negative impact of the charge off is concerned — all you can really do is wait. But there are still other ways you can rebuild your credit.

Make all payments on time. Don’t put yourself back in a situation where a charge off might occur. Making at least the minimum payment on your credit card bill on time, every month, will slowly help build up your credit.

Don’t apply for many new lines of credit. Applying for many lines of credit in a short time results in hard credit inquiries, which may reduce your credit score.

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