Credit Card Charge-Off - What Does It Mean And What Should You Do About It? - Page 2
Here are a few simple rules to follow when trying to avoid a charge-off that hasn't happened yet:
* Don't be intimidated or threatened by pre-charge-off collection tactics. Keep a cool head and don't take it personally when collectors try to get under your skin.
* Call your creditor to find out the minimum payment necessary to avoid the charge-off, and subsequent payments to keep the account current going forward. Don't commit to this payment (or series of payments) unless you're sure you can follow through.
* Negotiate a lump-sum settlement at 50% or less if you have the resources, or a workout plan for monthly payments that you can live with.
* Do not allow bill collectors to talk you into using post-dated checks, or providing your checking account details over the telephone. Instead, make payments via cashier's check or money order.
* Do not make payments based on a verbal arrangement. Get the deal in writing and signed by a creditor representative who has authority to approve the workout plan.
What should you do if you simply don't have the money to rescue the account from charge-off, or if the account has already been charged off by the creditor?
* Take a deep breath and relax; the sky won't fall on your head just because you had a charge-off.
* Realize that you still have an opportunity to resolve the matter by dealing with the original creditor or the collection agency assigned to the account.
* Negotiate a lump-sum settlement with the creditor or collection agency. Again, aim for 50% or less, and ask for the charge-off to be deleted from your credit report as a condition of the settlement. (Most creditors will not agree to this, but it's worth asking anyway. Do be sure that they will update your credit report to show that the matter has been resolved and the account has been satisfied.)
* If you can't work out a deal with the collection agency assigned to your account, then wait until it goes to another agency! Eventually, it will either be assigned or sold to an outfit that you can deal with to get the matter cleared up.
To sum up, a charge-off is not the end of the world. It should certainly be avoided if possible, but not at the risk of making things worse by committing to payments you're not sure you can keep up with. Just remember that the creditor doesn't want to see a charge-off any more than you do, so use that knowledge to your advantage in working out a mutually acceptable arrangement. Get everything in writing, don't disclose your checking account details, and follow up to make sure the creditor reports the matter correctly on your credit report. You'll find that it's easier than you think to resolve a charge-off situation before it happens, or clean it up if it's already taken place.
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