How to Repair Your Credit Report
After a Creditor Charge-off 

Do you have a charge-off on your credit report from one of your former creditors?

You won't be able to get rid of it completely. Negative entries like this one stay on your credit report for seven years and cannot be erased or eliminated. However, you can minimize the effect on your credit report.

Generally, the last two or three years of your credit history counts the more in your credit report.  

Credit or Debt Charge-off

When an account is charged off by your a creditor, the balance owed is no longer an asset of the company and is charged off its financial ledgers as a bad debt for tax purposes.

Most creditors who charge off balances owed report it to the credit bureaus. So you will want to do everything you can to avoid a charge off.

Check Your Credit Reports

Here's how to begin to turn this item into the "incredible shrinking negative entry" on your credit report. If you haven't already, you need to pay what you owe on the account. Next, I want you to check your credit reports from all three reporting agencies to see if the charge off shows. You can get a free copy from each bureau once a year at AnnualCreditReport.com.

If your creditor's charge off appears in your report, your credit score will not improve by paying what you owe on the account. The damage to your score has been done, and paying the account does not remove the fact that it was charged off. The credit scoring models calculate only what is included in your credit report. Paying the account, unfortunately, does not remove the charge off designation.

When a lender reviews your credit report, he or she understands that mistakes with credit are common. What matters is whether you have done what you can to correct the mistake and, most importantly, have paid what you owe. Paying late is not ideal, but paying any outstanding accounts is critical to qualify for a mortgage loan in today's tight credit environment.

To minimize the effect of the charge off and ensure you can successfully qualify for a mortgage, continue to add positive information to your credit history. Pay all your accounts on time and as agreed.

New Credit Accounts

Open new accounts only as you need them, and don't make any large purchases like a car or furnishings for an entire house just before you apply for your mortgage loan.

The more time that goes by after your charge off issue is resolved, the less impact it will have on your credit score and the greater your chances of getting the mortgage you want. Just keep current with all your credit obligations and make smart financial decisions moving forward.

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