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What Is a Credit Card Charge-Off?

Last Updated: June 13, 2024
3 min read
Using your credit card

Table of contents

What is a charge-off?
When do credit card charge-offs occur?
How does a credit card charge-off affect your credit?
How to rebuild your credit after a charge-off

Key points about: credit card charge-offs

  1. A credit card charge-off is when a creditor has written a debt off as a loss.

  2. A charge-off doesn’t mean the lender won’t stop trying to collect the credit card debt.

  3. If the creditor can’t successfully collect the debt themselves, they may hire a debt collection agency or lawyer to try and collect it.

A credit card charge-off happens when a credit card company no longer considers the debt to be an asset, i.e., the creditor has written it off as a loss. It's important to remember, though, the debt is still owed. While no additional charges and in some cases no additional interest charges will be added to the account, the charge-off status will be reported to credit reporting agencies and could negatively impact your credit score.

Still, there are ways to improve your credit after a charge-off. Let’s explore more about what a credit card charge-off is, and the impacts one may have on your credit.

What is a charge-off?

A charge-off is a mark on your credit report showing potential lenders that you haven’t repaid your credit card debt for many months. When a credit card issuer has determined that you’re unlikely to repay your debt, they report a charge-off to at least one credit bureau. It’s important to note that this doesn’t mean they’re writing your debt off. On the contrary, failure to repay charged off debt could seriously hurt your credit.

When do credit card charge-offs occur?

Charge-offs typically occur after an individual has failed to make at least the minimum required credit card payment on their credit card debt for many months.

When the charge-off occurs depends on the contract terms and type of credit card account, according to Equifax®, but typically happens between 120-180 days after you first miss your due date. After the charge-off, the credit card company no longer considers the debt an asset, but at the same time, the lender won’t stop trying to collect.

That last point is important: a charge-off doesn't mean the delinquent cardmember doesn’t have to pay their debt.

After a charge-off, the entity trying to collect payment can change. A credit card issuer may first attempt to collect the debt itself, but after a period of unsuccessful attempts, may hire a debt collection agency or attorney to collect on its behalf. In some cases, card issuers may sell the debt. When debt is sold, its new owner may appear on your credit report along with the original creditor.

How does a credit card charge-off affect your credit?

A charge-off will appear on your credit report for up to seven years after the first missed payment on the charged off account. Because payment history is such an important factor of your credit score, even one missed payment or late payment can negatively affect your score. After several late payments and the account has been charged off, you’re likely to see a significant negative impact to your score.

How to rebuild your credit after a charge-off

Even though a charge-off can remain on a credit report for seven years, there are still ways you can rebuild your credit history during that time.

Make all payments on time. Don’t put yourself back in a situation where a charge-off might occur. Making at least the minimum payment on your credit card bill on time every month can slowly help build up your credit. If you need financial assistance, you should contact your lenders to discuss options for repayment.

Also, don’t apply for too many new lines of credit. Applying for many lines of credit results in hard credit inquiries, which may reduce your credit score and set your credit repair process back.

Did you know

If you’re looking to get your credit back on track, the Discover it® Secured Credit Card can help you rebuild your credit with responsible use.1

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  1. Build credit with responsible use(Secured): Discover reports your credit history to the three major credit bureaus so it can help build/rebuild your credit if used responsibly. Late payments, delinquencies or other derogatory activity with your credit card accounts and loans may adversely impact your ability to build/rebuild credit.

  • Legal Disclaimer: This site is for educational purposes and is not a substitute for professional advice. The material on this site is not intended to provide legal, investment, or financial advice and does not indicate the availability of any Discover product or service. It does not guarantee that Discover offers or endorses a product or service. For specific advice about your unique circumstances, you may wish to consult a qualified professional.