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Credit Scores and Charge Off Debts

It’s that time again; the phone is ringing again about that credit card you can’t pay, and you are stressing out. So, what do you know about credit scores and charge off debts? Is it the end of the world if you have a charge off?

First things first—no, it is not the end of your world if you have a charge off debt. Yes, there will be a black mark on your credit score, and this is due to the fact that your credit score is based on your ability to pay on time.

Credit scores determine a great number of things, the most important being your lifestyle. If you pay all of your bills on time, creditors will regularly report you as paying on time, and your rating will be right up at the top. Now add in some credit card accounts, a car loan, and a mortgage.

As you start to pay on these, you do well—for quite some time. Your credit rating is still tops and your lifestyle is great. You can trade in a vehicle every couple of years with no problems, get a new loan each time without batting an eye—and get the lowest interest rate possible on any loan or credit card you want.

But what are some other scenarios involving credit scores and charge off debts? Well, consider that something happens to you, and you have an accident that puts you out of work for a year. You can’t pay your bills, and even though you have some income, suddenly your credit cards and other bills fall behind.

Suddenly, the credit score that was immaculate is now not so pristine. Your ability to go get that new vehicle right away at the lowest interest rate possible is gone, and you may suddenly find other facets of your life changing as well.

If you have found yourself with no savings at all, you may discover that paying every day bills such as the electricity and water may be difficult.  Having these utilities cut off can also affect your credit score, as they report your payment activities to the credit bureaus as well.

If over time you are unable to pay back some of the debts incurred, you will face what is known as charge offs. While these will add a black mark to your credit score that will stay for a number of years, you still have the ability to first reason with your creditors.

Truthfully, charge offs are a way for the creditors to get your account off of their books for the financial year, but the creditor will pester you for payment as much as possible. Talking to the creditors will help you settle the account, and may possibly avoid the charge off.

Consider your options, and talk it out with your creditors, but don’t let them convince you into doing something that you cannot reasonably handle. Now that you know the basics of credit scores and charge off debts, hopefully you can put your knowledge to good use. Don’t be intimidated and stand up for yourself; credit scores are important, but so is your sanity.

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