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Dealing with Charge-Offs and Settlements

If you are trying to clean up your credit report, if you are trying to resolve bad credit issues, you likely have experienced concerns about charge-offs and settlements.  You may be wondering how you can go about dealing with charge-offs and settlements.  Through this article you will be provided some basic information to assist you in developing a plan to aid you in dealing with charge-offs and settlements, all of which will appear on your credit report in most instances.

Understanding Charge-Offs

In simple terms, charge-offs are accounts that are so delinquent that a creditor simply has given up and has written of the debt as a loss.  There can be a spot of hope in regard to chare-offs, however.  If the charge-offs involve medical bills (for example) and not revolving credit, an institution considering making a loan to you for a home or a car may penalize you as harshly for medical bills that were charged-off provided revolving accounts have a positive history on your credit report.

Understanding Settlements

A settlement occurs when you agree with a creditor to resolve a debt by paying an amount that is less than the actual amount due and owing.  For example, assume that you owe a debt in the amount of $1,000.  You have gone for an extended period of time and have not been able to pay the amount due and owing.

In time, you and the creditor agree that the account will be deemed satisfied in full provided you pay to the creditor an agreed upon amount which in this example is $600.


Plotting a Course of Action

Both charge offs and settlements can have a negative impact on your credit report and credit history.  Therefore, at a minimum, when it comes to charge offs and settlements that are contained on your credit report, you would be well served taking advantage of your right to have a statement entered onto your credit report after any negative entry.  Through this entry, you can explain your version of the circumstances surrounding any particular charge off or settlement. 

The entries suggested are fairly easy to post.  You provide this information to the particular credit reporting agency or agencies that have the charge off or settlement included in your overall credit report.

Working with the Creditor

In some instances, during the settlement process, a creditor may be willing to agree to submit to a credit reporting agency that you have satisfied the account in full.  This notation will be put onto your credit report and will look better than a statement that the account merely was settled. 

In the final analysis, a charge off will have a more significant negative effect on your credit report than will a settlement.  At least with a settlement, it will be clear that you have made some payment on the account in question.