Editorial Policy

Charge-Off Mistake Dragging Down Credit Score

Erica Sandberg

October 16, 2012

QDear Erica,

My credit card was charged off incorrectly. The case was dismissed by the judge in court. Also, my car was repossessed, but I paid off the debt and have a letter from the car loan company saying they no longer hold interest in me and my debt was clear. So how do I restore my credit and get these items off my credit report? — Karen

AHi Karen,

You’ve got a couple of issues here, and I’ll get to each. But first know that the bureaus that develop consumer credit reports are required by federal law — the Fair Credit Reporting Act — to list only accurate and timely information. This means that you have the right to dispute false or old information and have those problems resolved in a timely fashion.

I can’t tell from your letter exactly what happened with the credit card in question. Did you treat the account perfectly and the issuer completely misfired? If so, when you clear up the error, your reports will improve dramatically. Conversely, if you did miss payment cycles, that information will remain on the reports for seven years.Ask Erica

Whatever happened before the time the issuer erroneously charged the debt off, the issuer reported that action to the credit bureaus when it shouldn’t have. Thankfully, it sounds as though you already settled the situation using the legal system, and because of that, you have some documents proving that the bank was in the wrong. All you have to do now is file a dispute with the credit bureaus. You can do it on the website of any of the bureaus (that bureau will notify the others, so you needn’t contact all three). The credit bureaus will then investigate the matter with the credit card company, and since they will be unable to verify that the charge-off is accurate, the credit bureaus will no longer report that notation.

These investigations can take up to 30 days, so wait a while before pulling the reports again to make sure the charge-off notation is no longer evident. Again, though, any skipped payments that really did occur will remain until they can no longer be listed by law.

So what of that vehicle repossession? If it did happen, notice of that action will be on your credit reports for a full seven years, and there’s not much you can do about it except to wait for time to work its magic.

Don’t fret too much about things you can’t change, and instead be happy with what you’ve done. You already repaid the loan’s balance. That fact has surely found its way onto your credit reports, which is great. A satisfied debt always looks better than an unsatisfied one.

To further restore your credit rating as quickly as possible, just begin to borrow and repay responsibly from this point forward. If you have an active credit card, use it to purchase items that you need, and make a commitment to never carry a balance. Send in all of your payments before the due date, too. Such positive action will be added to your credit reports, and they will gradually start to gleam.

In the meantime, pull your credit reports at least once a year for free at AnnualCreditReport.com, and check them carefully for errors. You don’t want mistakes holding you back from any new loans or lines of credit you might want in the future. If you do spot anything wrong or too old, just use the dispute process again. At that point, you’ll be familiar with how it works.

Got a question for Erica? Send her an email.