Can You Rebuild Credit After Your Accounts Have Been Charged Off?

A charge-off is tantamount to a creditor giving up on the thought that you will ever repay your debt. To have one of your accounts charged off, you must be seriously delinquent on your debt. This can wreak havoc on your credit report, as charge-offs remain on the report for seven years. However, even with a charge-off you can rebuild your credit. It's a long, slow process, but eventually you can have the credit score you had before your charge-off.


If you hear that your debt is "charged off," you might feel like celebrating, thinking you no longer owe your debt. Unfortunately, nothing could be further from the truth. A charge-off is basically an accounting entry your creditor makes so it can take a loss on your debt, usually 180 days after you stop making payments. Legally, you still owe the debt, and interest and penalties keep running, further damaging your credit. The only way to start rebuilding credit after a charge-off is to pay off the amount that you owe.

Amount Owed

The amount of money you owe contributes a whopping 30 percent of your FICO credit score. If you have an account charged off, it is usually because the amount of debt is so significant that you can't pay it off, which damages this part of your credit score. After a charge-off, you can start increasing your credit score by paying off the full amount of your debt. By reducing the amount that you owe to zero, a major factor in determining your credit score will start going higher immediately.

Payment History

The only thing more important to your credit score than the amount you owe is your payment history. Unfortunately, if you already have a charged-off account, then the 35 percent of your credit score that consists of your payment history is severely damaged. Things can continue to get worse, however. The longer you fail to make payments, the longer it will take your credit score to recover. Making payments after your charge-off will improve both your payment history and your credit score, even if you don't immediately pay the charge-off in full. Additionally, making payments on your debt could prevent creditor lawsuits, which could result in judgments and further damage to your credit score.

Remaining Factors

After you manage to pay off the amount of your charge-off, tackle some of the other components of the FICO score to further improve your credit. The length of your credit history makes up 15 percent of your credit score, so the longer you can keep accounts open, the better the reflection in your score. Having additional types of credit, such as installment loans, can help boost the 10 percent of your FICO score devoted to your credit variety. However, limit the number of credit applications you make, as factors related to new credit comprise 10 percent of your credit score.

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