Rebuild Your Credit After a Collection or Charge-Off

Man going through finances at table with papers, laptop, calculator, and cup and pot of coffee in front of him


Two of the worst types of account delinquencies are debt collections and charge-offs, both of which are the result of not paying bills for several months. Because they show a serious late payment, which will influence 35% of your credit score, both have severe negative impacts on your credit score. You might have a hard time getting new credit applications approved as long as there's a charge-off or collection on your credit report. Fortunately, with some effort, you can overcome the damage.

Dispute Errors

If you have a collection or charge-off that's not yours or that's not reported correctly, you can dispute the error with the credit bureaus.

To dispute a credit report error, write a credit report dispute letter explaining why the account is inaccurate. Include a copy of any proof you have, to help the credit bureau with its investigation. If the error isn't deleted after you dispute with the credit bureau, you can dispute the account directly with the business that listed it on your credit report.


The credit bureaus have up to 45 days to investigate your dispute and update your credit report. If your credit report isn't updated, they must tell you why.

You're allowed to sue a credit bureau that doesn't remove disputed errors from your credit report. Hopefully, you won't have to go that route, but save copies of everything related to your dispute in case you have to take legal action.

Get a $0 Balance

Paying off a charge-off or collection balance won’t delete the item from your credit report, and it won’t help your credit score right away. Once the blemish is there, the damage is done—at least for the short term. However, a paid balance is always better than an unpaid one, especially if you’re trying to get new credit or a major loan like a mortgage.

Before you pay, draft a pay for delete letter offering to pay the balance in full in exchange for having the item removed from your credit report. The creditor or collector may deny your request, but it’s worth a try.

Settling the debt also is an option if your creditor agrees, but keep in mind your credit report will reflect that you settled the account. A settlement can also hurt your credit score in some cases.


Settling a debt means that the creditor or collector agrees to accept a smaller payment in lieu of the full balance.

In the worst-case scenario, just pay the balance in full. If the account is six or more years old, you can wait and let it drop off your credit report. The credit reporting time limit for collection accounts is seven years. For a charge-off, it’s seven years plus 180 days from the date of the first delinquency.

Keep Accounts Current

The best way to rebuild your credit after a mistake like a collection or a charge-off is to get some positive information on your credit report. If you still have active credit cards or loans, continue paying them on time. The same thing goes for accounts that aren’t reported to the credit bureaus. Those can be sent to collections and also wind up on your credit report if you fall behind on your payments.

You’ll have to open up new accounts if all your other accounts were charged off or sent to collection. You already may have experienced difficulty trying to get credit with bad marks on your credit report. A select few lenders offer credit cards for rebuilding credit. Alternatively, you can save up a few hundred dollars and open a secured credit card. You'll receive your security deposit back as long as you don't default on the credit card balance.

Be Patient

Little by little, your credit score will improve as you use your credit cards and pay on time every month. You can watch your credit score progress by using a free credit-scoring service like Credit Karma or Credit Sesame. Be patient though. You can wreck your credit score overnight, but you can’t rebuild it in as little time.

A goodwill letter is another option and similar to a pay for delete letter, but you instead request that the creditor or collector remove a paid account from your credit report as a courtesy. Briefly explain why you became so late. There's always a chance that whoever receives your letter is feeling generous and will update your account. If you are sincere and can show that you are working to maintain good credit, you'll have a better chance at success.

Frequently Asked Questions (FAQs)

What is a charge-off?

A charge-off on your credit report indicates that a creditor gave up hopes of getting payment from you after several attempts. The creditor closes your account and marks it as charged off. It will often then sell your outstanding debt to a collections agency, which will then attempt to collect the debt from you. That could result in two derogatory remarks on your credit report—one for a charge-off, and one for collections.

How long do charge-offs and collections stay on my credit report?

Collections and charged-off accounts remain on your credit report for seven years from the date when you first stopped paying. If you pay off the balance due to collections before seven years is up, it will remain on your credit report but have less impact on your overall score.

How much will my credit score increase when I pay off collections?

Paying off collections may or may not cause your credit score to increase as long as the collections account stays on your credit report. Newer credit-scoring models ignore collections accounts with a zero balance, which will improve your score. Older models will still factor them into your score, though.

Was this page helpful?
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. myFICO. "Payment History."

  2. Consumer Financial Protection Bureau. "How Do I Dispute an Error On My Credit Report?"

  3. Experian. "What Is a Charge-Off?"

  4. Equifax. "How Long Does Information Stay on My Equifax Credit Report?"

  5. Experian. "Can Paying off Collections Raise Your Credit Score?"

Related Articles