A charge off appears in the negative section of your credit report. The reason for this is because a charge off is a debt that the creditor has decided that they cannot collect. Usually they decide this after you have failed to make a payment for 6 to 12 months.
Once they declare your debt uncollectable the creditor can claim that as a deduction against the business income. This gives the creditor an incentive to declare your debt uncollectable and to stop harrassing you.
The bad news is that a collection agency can "buy" the debt. This gives them a legal right to collect the debt and any fees and interest that have accumulated on the debt.
The negative impact occurs on your credit report because you are now listed as welching on the debt. To most creditors a debtor who refuses (or cannot) pay their bills is the worst kind of credit risk. They would rather see a bankruptcy on your credit report.
If you see a charge off on y! our credit report that is an error or is not yours you DEFINITELY need to dispute it. You can find a good article on how to dispute a credit report error at www.truefreecreditreports.org
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