What is Charge Off on Credit Report? How to remove Charge-off from Credit Report?
What is Charge-Off?
The term Charge-Off is mainly seen in an Equifax credit report. In the account section, the account status is written as Charge-Off. If a customer takes a loan and does not repay it on time, and continuously fails to make payments for about 6 months to 1 year, the bank may remove that account from its books of accounts and declare it as bad debt. Once the account is considered bad debt, the status “Charge-Off” appears in the credit report in place of the account status. This status is most commonly seen in Equifax credit reports.
What is the difference between Charge-Off and Written-Off?
In reality, there is not much difference between these two. When a bank declares a loan as bad debt, the status may appear either as Charge-Off or Written-Off. As mentioned earlier, Charge-Off usually appears in Equifax reports. In India, there are four credit bureaus — CIBIL, Experian, Equifax, and CRIF. Except for Equifax, the other three credit bureaus generally show the status as “Written-Off” when a loan is declared bad debt.
In a CIBIL report, you will see “Written-Off” mentioned next to the credit facility status of that loan. On the other hand, in an Equifax report, the account status shows “Charge-Off”, and sometimes it may also appear along with Written-Off.
What is the impact if Charge-Off appears in your credit report?
Its impact is very negative. Your credit score drops significantly. If you apply for a loan in any bank, your loan application may get rejected. Not only banks, but if you apply for a loan with any Non-Banking Finance Company (NBFC), your loan may also be rejected there. However, there are some credit builder loans where the credit score is not checked, and you may get a loan there. Apart from this, you may get some small amount loans through app-based platforms, but getting a normal loan becomes difficult.
How and when does the Charge-Off status get removed from the credit report?
This Charge-Off status will not be removed until you make the payment. In India, there is a common misconception that such a negative status automatically gets removed after 7 years. But in reality, this is not true. This misunderstanding exists because credit bureaus like Equifax also operate in the United States, where in some cases such accounts may be removed from the database after 7 or 10 years. However, there is currently no such rule in India.
As a CIBIL rectification agency, we review many credit reports every day. We have also seen cases where negative statuses such as Charge-Off, Written-Off, or Settled that are 10 or even 15 years old still appear in the report, and they can only be corrected after the payment is made.
What should you do if Charge-Off status appears in your credit report?
If the Charge-Off status appears in your credit report, the first step is to carefully read the report. You can download your report from the Equifax website, where the first report is available for free. After reading the report, it is important to understand what the actual issue is. It is not always the case that Charge-Off appears because you did not make the payment. Sometimes, due to data mixing, an incorrect loan may appear in the report with a Charge-Off status. If this happens, you can raise an online dispute or complaint, and that loan can be removed from the report. In some cases, not only the status but the entire loan account may also be removed from the report.
What if you actually took the loan and did not make the payment?
If you actually took the loan and did not repay it, because of which the Charge-Off status has been reported, then you will need to make the payment. For this, you can contact the bank manager and request a demand letter or an outstanding letter so that you can know how much amount is still pending. After that, make the full payment. Try to avoid settlement with a discount because in that case a “Settled” status may appear, which is also considered a negative status. Therefore, paying the full amount is usually the better option.
Why is the No Due Certificate important?
After making the payment, make sure to collect a No Due Certificate because it is a very important document. In many cases, it has been seen that a customer paid the full amount but the loan account was not closed. A No Due Certificate is issued only when the account is completely closed. Later, when you file a complaint with Equifax, this document will be helpful as proof.
How to raise a dispute with Equifax after payment?
After making the payment, you can raise an online dispute with Equifax. Earlier, there was no direct option for raising an online dispute, but now this facility has been introduced. Apart from this, you can also file a complaint through email. While sending the email, attach the necessary documents such as the No Due Certificate and payment receipt. Filing a complaint through email is considered an easy and effective method.
What to do if the issue is not resolved?
If you have filed a complaint and the issue is not resolved within 30 days, you can email the Nodal Officer. If the problem is still not resolved from there, you can email the Principal Nodal Officer. Even after that, if the issue remains unresolved, you can file a complaint with the RBI Ombudsman. It is important to have a little patience here because Equifax’s process can sometimes be slow, so you should keep following up regularly.
Hopefully, now you understand how the Charge-Off status can be removed from a credit report. If you have any doubts, feel free to write them in the comment box.
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