Charge-Off
Direct definition
A charge-off is a creditor's accounting decision to write off a seriously delinquent debt as unlikely to be collected.
Written by the Vabasso Mortgage Editorial Team · Reviewed against agency and federal sources · Read our editorial policy for how we research and review mortgage content
Plain-English explanation
When an account goes unpaid for an extended period, the creditor may charge it off internally, which is a bookkeeping action, not a forgiveness of the debt. The debt can still be pursued through collections and typically remains on credit reports for a period of years.
Why it matters
A charge-off can significantly affect credit standing and mortgage qualification, and lenders may ask for an explanation or documentation of resolution.
Where you may see it
- Credit report
- Collection account
- Letter of explanation
A real-world example
Educational and illustrative only
A common misunderstanding
A charge-off is not the same as the debt being erased; the borrower may still owe the balance even after it's charged off.
Frequently asked
Does paying a charge-off remove it from my credit report?+
Not necessarily — paying it may update the status but the record can remain for a set reporting period, which varies.
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- Author
- Vabasso Mortgage Editorial Team
- Reviewed by
- Vabasso Mortgage Licensed Advisory Team
- Last reviewed
- July 30, 2026