How Can My Failure to Remove Charge Offs and Bankruptcies Affect My Credit Rating?

by Tom Taus on April 26, 2012

In dealing with debts, you might have some confusions with charge offs and bankruptcies. When you are faced with the choice on which among these two you would rather have; you will probably have a hard time picking one. Although both of these accounts appearing on your credit report have negative effects on your credit score, each of them sends a different message to your future creditors.

Anyone who barely has any knowledge on such things is bound to just blindly choose one among the two. If you think that you will be dealing with these anytime soon, it would be very helpful to at least have an idea on their main differences along with their effects on your credit rating. Knowing this may also shed some light to move other people to prevent themselves from getting into such financial mess.

Your creditor has the option to charge off your debt and consider it as a loss if they see that you have not been able to keep up with your payments after about 3 months. A charge off notation can stay in your credit for as long as seven. This will be the case unless you have made some negotiations with your credit to get it removed.

ne very important thing to remember with a charge off is that you will not be spared from the responsibility of paying for it. Your credit can very well still contact you from time to time to remind you of paying for it. Once you have done so, this record will be changed to ?charge off paid? or ?charge off settled?. Although it will still carry a negative connotation, at least it will not be as bad as a ?charge off? account.

Depending in the amount that you owe and the length of time that you have failed to keep up with its monthly payments, a charge off will negatively affect your credit rating. It will also be very hard for you to acquire loans that have favorable rates and terms. Once your creditor has decided to charge off your debt, he might also freeze your line of credit and continually get in touch with you to ask you to pay for your debt.

A bankruptcy, on the other hand, is something that you will choose on your own. When you are already unable to pay for your debts, you can file for bankruptcy so that you are rid of the responsibility to pay for it. You will have to go through this process with an attorney who will help you prove to the court that you are just financially incapable to pay for your debt.

Again, the severity of the effect of a bankruptcy will depend on the type of bankruptcy that was filed along with the amount of the debt and the length of time that you have failed to pay for it. On average, it can stay on your credit report from 7 to 10 years. It will initially be very hard for you to acquire loans and credit. After about 2 years, your credit rating will start to recover and you will find lenders that will allow you to borrow money.

Charge offs and bankruptcies are actually very preventable and you do not have to hire and pay for a professional to do it for you. You can dispute erroneous items on your credit report or just pay off your debts. Talk to your creditors for a possible payment or settlement plan so that you can have a little ease in keeping up with the payments.

Look for ways on how ro remove a bankruptcy and remove a charge off now and spare yourself the worries and hassles of dealing with their effects.

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