How to Remove a Charge Off from Your Credit
Reports
Is an old debt sitting on your credit
reports for longer than it should be? Don't be surprised-
you are not alone. There are many misconceptions about debts
charged off prior to 1996 and it is probably one of the most
common questions we get. Often referred to as the SOL
- statute of limitations for credit. There are actually 2
things to worry about. The SOL for reporting bad credit and
the SOL for collecting debts. Both have their own time limits.
A charge off is the term a creditor uses when they write off
your debt because you didn't
pay it back. You CAN be taxed on that debt as well.
Charged
off debts and how long can they remain on your credit
reports: You have to remember, the old FCRA
(before revision) was very ambiguous, which means, even though
it was not specific for saying exactly when a date commenced,
it was often thought that making a payment could renew the
statute of limitations and the seven year clock would start
all over again. Consumers worry about this because
it was a catch 22 in their mind. If I pay a portion of it,
they can come after me again and it will stay on my credit
for another 7 years so why bother? That was the general consensus
and trying to get a straight answer out of a debt
collector or the credit bureaus was even more frustrating.
Wiki Fact: In accounting and finance,
bad debt is the portion of receivable that can no longer be
collected, typically from accounts receivable or loans. Bad
debt in accounting is considered an expense. The creditor
will report bad debt losses to the IRS if over $600.00.
There are two methods for the creditor
to account for bad debt: Direct write off method (Non - GAAP)
A receivable which is not considered collectible is charged
directly to the income statement. Allowance method (GAAP)
An estimate is made at the end of each fiscal year of the
amount of bad debt. This is then accumulated in a provision
which is then used to reduce specific receivable accounts
as and when necessary.
By understanding the credit
laws you can determine how much longer you need to wait
for the item to be removed. You don't have to be in credit
purgatory forever. So just how long can an item legally remain
on your credit reports and how do you remove it sooner? That
also depends on your awareness of the dates on the debt and
exactly how old it is. The state laws for how long it can
remain on your credit can be either state or federal. If your
state offers more protection- then it will supersede the federal.
For example, perhaps in NY a debt can remain for 5 years but
under the federal (FCRA) its seven. Your state would apply.
It's called the Supremacy Clause.
Credit bureaus often contain mistakes,
its inevitable with the amount of data they house. Its not
uncommon for someone to see old expired debts still listed
but often its not so much a credit bureau mistake as it is
the source that reported it. The bureaus receive that information
from your creditors so if the mistake is from them, it will
carry over. You can either contact the creditor to update
their records or go directly to the credit bureaus and open
an investigation to advise them of the mistake. The bureaus
will contact the creditor on your behalf and ask for an update.
Before contacting the credit bureau its a good idea to contact
your creditor first and advise them of the mistake. This will
save time when the bureau reaches out to them for the correction.
If not, the creditor may provide the same false information
a second time and you'll have to start all over. Most expired
SOL issues on credit reports are a mistake from the source's
end.
Dont overlook the fact that a collection
agency may have a hand in the false information being on your
credit reports. When they purchased the debt they may have
updated the account's dates to the credit bureaus as the date
they purchased it. This is not legal. An original charge off
date cannot be changed to accomodate a collection agency to
use as a collection tool. The FCRA
protects you from this.
There are two statutes to be considered
as mentioned earlier
One to report and one to collect. In regards
to collecting, if the debt does not meet the rule, then a
lawsuit is still legally enforceable. If it does, that is
your defense to stop any lawsuits from the collector or creditor.
A bill collector isn't going to volunteer this information
to you, and in fact, they hope you dont discover it yourself.
There is no law against them collecting on an expired debt
so why would they tell you?
Once you receive the initial notice from
a collector you'll have about 30 days to respond to whether
you dispute it or not.
If you dont, then legally the collector has the right to assume
the debt is valid. If you do question the legitimacy of the
debt then be sure to immediately respond
to the notice in writing to protect your rights. Tell
the collector what it is that you dispute about the debt -
whether its the balance, date last paid etc., or if the debt
has expired. Attach any proof to the letter you have - especially
proof of an incorrect date that proves your statute of limitation
claim. Once the collector is notified of an expired debt in
writing, then activity must cease.
If your SOL for the credit report hasn't
expired yet, that will not change, however, you do have a
right to open an investigation to the credit bureaus of its
accuracy. If the bureau is unable to confirm it then the item
must be removed. If the item is verified as accurate then
it will remain until the expiration of the SOL even if its
no longer collectible.
Charge off negotiation letters
If you're trying to clean up your
credit reports
then you may find the DIY
credit repair kit fits exactly what you need. We've got
over 40 sample credit
and collection letters for almost any credit problem.
From charge offs to negotiating with collection agencies,
these letters are pre-written and come with our credit repair
success strategies ebook, ask the expert and legal research
tools. Everything you need in one location to fix your credit
legally and save money too.
DIY Credit Repair
Kit Everything you need to fix your credit reports using legal methods.
Validation of debts, cease and desist, fighting credit bureaus stalls,
ask the expert, credit and collections ebook, free bonus credit scoring
ebook plus over 40 sample credit repair letters PLUS lifetime access for
a one time fee of only $29.95. Check it out!
