Financial uncertainty is common today, and it can make it hard to make debt payments. If you miss multiple debt payments, you risk a charge-off. In this guide, learn what a charge-off is, how it affects your credit score, and how to resolve a charge-off in South Carolina. Also, consider options for paying off a charge-off, including peer-to-peer lending, cutting expenses, or a title loan.

Key Takeaways

• A charge-off occurs when a creditor writes an unpaid account off as a loss, typically after several months of missed payments, but you may still owe the outstanding balance.
• A charge-off can negatively affect your credit and remain on your credit report for years. Missed payments, high credit utilization, the charge-off itself, and a resulting collection account can all hurt your credit profile.
• After a charge-off, check it for accuracy, request documentation if a debt collector is involved, and get any payment or settlement agreement in writing before paying.
• If the reported charge-off contains an error, a successful dispute may result in the information being corrected or removed; an accurate charge-off generally remains even after it is paid.
• South Carolina has a three-year statute of limitations for certain debt lawsuits, but that is different from credit reporting. Creditors or debt collectors may still attempt to collect a debt after the limitations period has expired, while a charge-off can remain on your credit history for up to seven years.

What is a Charge-Off?

If your creditor no longer believes you can repay what you owe, the company may write off the debt as a loss. This typically happens after you miss about six months of payments (in some cases, your account may be charged off earlier).

The account’s status and its outstanding balance will still appear on your credit report. It will also be marked as “potentially negative”. A charge-off does not automatically mean your account will disappear from your credit report.

Furthermore, you will still be responsible for repaying the amount.

How Does a Charge-Off Affect Your Credit Score?

The charge-off itself isn't what hurts your score most. Missed payments and other negative items on your credit reports can severely damage your credit. Keep up with debt payments to avoid lowering your credit score and affecting your ability to get a home, car, or bank loan.

The following is how a charge-off affects your credit score:

• Late payments: Payment history accounts for 35% of your score, according to FICO. Once the debt is reported as 30 or 60 days overdue, your credit will take the biggest hit. The longer you are overdue, the more your score will drop, but the first impact will be the biggest.
• Going over your credit limit: If you have to simultaneously deal with accruing interest, penalties, and late fees, your principal balance might exceed your credit limit. As credit utilization usually accounts for 30% of your score, going over the limit will damage it.
• The account getting marked as a “charge-off”: This will hurt your score even more. This mark may also become a red flag for future lenders.
• The charge can remain on your credit history for up to 7 years: According to CBS News, a charge-off can stay on your credit history for up to seven years. Although the negative impact may diminish over time, an accurate charge-off can generally remain on your credit report for up to seven years from the original delinquency date.
• The debt being sent or sold to a collection agency: If this happens, you will not only get bombarded with calls and letters, but the collection account will also appear on your credit report. This will also affect your overall score.

What to Do First After A Charge-Off

The first thing you should do after a charge-off is remain calm. You want to keep your composure to handle the process properly. You don't need to panic, as you have options for disputing the charge-off or paying the cost to minimize its financial impact. 

You should take the following steps after a charge-off:

1. Check your account to verify the accuracy of the charge-off
2. If a debt collector is involved, request documentation
3. If the debt is valid, discuss payment or settlement, and get the agreement in writing before paying
4. Confirm with the creditor how paying the charge-off will be reported
5. Check that your payment has registered on your credit report

How to Remove A Charge-Off from Your Credit Report

Looking for how to remove a charge-off from your credit report can be difficult. If you manage to make the necessary payment, a note that the charge-off has been paid will be added to your report. An accurate charge-off will remain on your record, but the note that it's been paid may help your score. 

You can always dispute it if you believe that the charge-off is inaccurate. If there really has been an error, the charge-off will either be corrected or removed from your report. Disputes can take 30 to 45 days to resolve. Disputing an inaccurate charge-off can help; leaving one on your report can negatively affect your score. 

How do you remove a charge-off from your credit report if there is no error? You can try negotiating with the creditor. To increase your chances of success, contact the creditor, explain why you couldn’t repay on time (job loss, illness, etc.), and include proof. Negotiated removal is not guaranteed and depends on the situation.

Charge-Off Laws: Everything You Need to Know

A statute of limitations defines the time in which a lawsuit must be filed. In some states, the creditor will be allowed to file a suit even after 6 years have passed. The statute of limitations in South Carolina for debt is 3 years from the last activity on that account.

Despite South Carolina's charge-off laws, creditors can still try to collect a debt even after the statute of limitations has expired. Debt collectors hired by the original creditor can do the same.

If you want a peaceful life and not to get anxious every time your phone rings, paying off your charged-off account may be worth considering. After all, you are still legally responsible even for such accounts.

Charge-Off vs. Collection Account: What are the Differences?

When considering a charge-off vs. collection account, it’s essential to understand that one can lead to the other. A charge-off occurs when a creditor writes a seriously delinquent account off as a loss. The creditor may continue trying to collect the debt, assign it to a collection agency, or sell it to a third party.

A collection account may appear on your credit report after a debt is sent to or sold to a collection agency. The original creditor may hire a debt collector to collect the debt or sell the debt to another company. Collection accounts can generally remain on your credit report for up to seven years from the date of the original delinquency.

Options for Paying a Charge-Off

If the charge-off is accurate, you should consider paying the debt. The last thing you want is for debt to be sent into collections if you feel you can afford it. Don't let debt linger well past its due date to avoid negative credit consequences. 

Here are some options for paying a charge-off:

• Borrow money from friends and family: Peer-to-peer lending can help for a one-time charge-off. If friends and family have the money available, they can lend it to you to pay the charge-off as quickly as possible. Just make sure you have a repayment plan; failing to repay your friends and family can lead to a strain in the relationship. 
• Cut expenses: Make budgeting changes to ensure you can afford your debt. Remove unnecessary expenses, like eating out, subscription services, luxury items, etc., and use the leftover money to pay the charge-off.
• Use a payment plan: Creditors may consider a payment plan for a charge-off. Contact them to see if they are willing to let you pay off the debt in installments. This can make repayment easier to handle than paying it all back at once. You can rebuild your finances and pay the cost over the course of a few months.
• Consider a title loan: If you tried all other options, title loans are a last-resort option. They let borrowers who own their vehicle outright use its lien-free title as collateral to borrow up to $15,000 based on your vehicle's value. This loan carries risk because you must put up your vehicle title, so consider it only after reviewing the terms of use and consumer disclosures.

FAQs About Charge-Offs in South Carolina

What is a pay-for-delete letter?

A pay-for-delete letter is a written request asking a creditor or debt collector to remove negative account information from your credit report in exchange for payment. This is a request, not a guarantee, and creditors or debt collectors are not required to agree. Paying an accurate charge-off also does not automatically remove it from your credit report; it can generally remain for up to seven years from the date of the original delinquency.

What reporting errors can creditors make with inaccurate charge-offs?

Creditors can make mistakes when reporting a charge-off, including changing the delinquency date to keep the charge-off on your credit report, reporting the same charge-off twice, failing to update a debt's status after it's repaid, or listing a paid-off account with a charge-off.

Do I still owe debt after a charge-off?

A charge-off does not, by itself, cancel the debt you owe. The creditor may continue collection efforts, assign the debt to a collection agency, or sell it to another company, subject to applicable law

Get Help Paying a Charge-Off in South Carolina

If you have exhausted other options, Carolina Title Loans, Inc. can help you get emergency financing for charge-offs with our title loans. You can use your qualifying vehicle as collateral while continuing to drive it, and you can get approved with poor credit, provided you meet our other requirements. Contact us for financial assistance by filling out our online inquiry form or calling us to discuss the title loan process.

Note: The content provided in this article is only for informational purposes, and you should contact your financial advisor about your specific financial situation.