A number of people think that clearing charge-off will help improve their credit score. However, this is not true. Keep this in mind that “Once a Negative Trade Line always a Negative Trade Line.”
A “charge-off” account is the one in which the creditor does not get his payment for about six months, and he shows the same in the company’s loss account. Once the amount is charged-off the lender will inform about the same to the credit bureau so that the information is uploaded in the defaulter’s report. This certainly does not mean that you do not owe the amount. You still remain liable to your creditor.
The effects of the charge-off will be significant if the score was too high. However, if the report already had default payments and negative items, the drop in the score will not be very significant.
Keep in mind that a charged-off account will remain in your profile for 7 years. Apart from this, in spite clearing a charge-off account, it will do no good to your credit score. Hence, it is wise to be careful from the very beginning. The damage is done and to rectify the same takes a lot of time.
However, do pay your charge-off account as soon as possible because the lenders in the future prefer those accounts that hold “paid charge-off” rather than “charge-off.” A paid charge-off account will put you in a better position while borrowing. This is because the lenders will feel that though the payment was delayed yet the amount was cleared.
Lenders want people who will not put them in a grave situation when it comes to collection. So maintain a good track record and stay credit healthy.