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Q:
I have recently heard the term charge off. What is it? How does it affect the lender, as well as the borrower?

I have recently heard the term charge off. What is it? How does it affect the lender, as well as the borrower? Please let me know. Thanks. -Jan

Jan,

A charge off occurs when the lender determines that a debt is uncollectable. At this time, the lender can consider the amount a loss for accounting purposes.

Even though an account is charged off, the borrower still owes the money. In addition, the charge off will appear on the borrower’s report for up to seven years. A paid charge off always reflects better than an unpaid charge off.

Hope this helps,

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