Written by Jazzy Mac — Founder, The 20-Minute Credit Fix
If the past year has taught millennials anything, it’s the value of their hard-earned money. Throughout 2021, we’ve seen a surge in alternative investment means through platforms like Robinhood, a massive spike in the average cost for homes across the country, and an unprecedented rise in inflation that we haven’t seen since the early 1980s.
Like many of those in my generation, I come from humble beginnings, being raised in a small town by parents whose combined income still put our family well below the poverty line. Also like many other millennials, the circumstances of my upbringing instilled in me the value of education and hard work, spurring me to not only put myself through college and land a well-paying job after graduating, but also to save more than $25,000 and raise my credit score by over 200 points in just two years by the time I was 23.
However, my own drive has not left me disillusioned to the financial woes of many of my disadvantaged peers. With millennials accounting for nearly one-third of all student loan debt in the US in the face of stagnant wages and rising prices on everything from everyday consumer goods to hard assets like cars and homes, I have made it my mission to empower 1 million millennials to take control of their finances by investing, stepping into homeownership, and building generational wealth.
Part of this process involves guiding others on how to avoid their credit accounts falling into delinquency, which can prompt collections to chase them down for missed payments or to charge-off their account, further harming their credit score. In this article, I want to help teach you how to stop paying collections for your debt and charged-off accounts.
What a charge-off is and why it matters for your credit
Credit is far more than a way to make purchases that can be paid off later down the line. Your credit score is crucial whenever it comes time to take out a loan on a new car or purchase a home in your name, or even just determine how much financial risk a bank or lending institution is willing to take on with you as a client. Making purchases on credit is the quickest (and often easiest) way to build your credit score, but on the other side of this coin, missing payments on credit is one of the most assured ways to severely lower your credit score.
When too many payments are missed concurrently, your credit account can fall into delinquency, prompting your bank or lender to charge-off that account. In doing so, that creditor essentially writes your account off as a financial loss and closes it to future purchases, severely impacting your credit score to your detriment.
The pitfalls of a charge-off don’t end with a lowered credit score, however. Not only can it remain on your credit report for up to seven years, but it also does nothing to relinquish your financial obligation to pay back the debt you still technically owe your account’s creditor. When your account with that creditor is closed, they will typically transition your debt owed to a collections agency who will then call, mail, and/or email you to collect payments, or even threaten legal action in the form of a civil lawsuit to do so.
The good news is that removing a charge-off from your credit report is not impossible; the bad news is that it isn’t easy to do, especially if the information regarding the charge-off of your account with a creditor is accurate.
Ways to remove a charge-off from your credit report
In events when the account that has been charged-off is in your name and its information is accurate, it can still be possible to negotiate with your creditor or collections official to either update or remove the charge-off from your credit report in a measure referred to as “pay to delete.” To put it simply, this is essentially you asking that the charge-off be removed from your credit report in exchange for a nominal fee, although this “fee” is usually not much less than the full amount you owe the creditor or collection agency.
If the creditor or collector denies your request for the “pay to delete” option, there are additional steps you can take to try and remove a charge-off from your credit and begin repairing and rebuilding your credit score.
When all else fails, file a formal dispute for your charge-off
A breakdown of the steps you can take to dispute a charge-off on your account and stop paying collections looks something akin to the following:
Step #1: Start by pulling your 3 most recent credit reports. You’re entitled to one free copy of your credit report every 12 months from each of the three nationwide credit reporting companies. Each separate company’s report may look slightly different than the others, so any major discrepancies could lend you fuel when negotiating the removal of your charge-off with a creditor or collections agency.
Step #2: Identify the charge-off(s) that collectors have placed on your credit report. Because charge-offs can cause major damage to your credit score, it’s crucial that you verify the date of the charge-off (which should be the date of your account’s first delinquent payment) as well as the outstanding balance you owe. If that balance is higher than you believed, ask that any additional costs or fees either be explained to you or removed from the balance you owe.
Step #3: Write a letter to your original creditor and any collections agencies your debt has been offloaded to outlining your intent to dispute the charge-off. In this letter, validate the date your account was marked as a charge-off and the total outstanding balance you owe. You can also ask for an itemized breakdown of any additional charges or fees that may have been added since your account was charged-off. Be sure to also include your legal name, address, the name and number of your charged-off account, as well as the official statement of your intent to dispute it.
Step #4: Mail the dispute letter outlined in the above step to the corresponding credit bureaus tied to your account, ensuring that place your signature at the letter’s end for official, legal confirmation purposes. Whatever you do, do not file a dispute with your creditor or collections agency online. This will waive your right to sue if your dispute isn’t properly investigated.
Step #5: Be prepared to wait up to 30 days for an official response to your dispute of a charge-off. If it returns with the charge-off status as “verified,” then you can rinse and repeat this process, but you have to be strategic as to how.
Jazzy Mac is a millennial influencer, serial entrepreneur, keynote speaker, income strategist, and world traveler. As the founder of The 20 Minute Credit Fix, Jazzy specializes in business education, credit management, and money makeovers for millennials. As CEO & Founder of the Jazzy Mac brand, Jasmine inspires her audience daily through her lifestyle channel “Life With Jazzy Mac” on YouTube, which has garnered almost 1 million views.