We often discuss the process of correcting errors on credit reports. We also enjoy talking about your legal options if a credit report mistake is not corrected. Depending on the severity of the error, and how you were harmed, you might have grounds to sue.

There’s an error which we’re seeing on credit reports more often, and we believe is worth addressing. This error stems from accounts which are past due, and ultimately end up being charged off. 

A charge off is a debt which is unlikely to be collected, and thus treated as a loss. A charged off account is a closed account. Debts are typically charged off after 4 to 6 months of being unpaid.

Leading up to a charge off, you’ll typically see a series of late payments marked on your credit reports. For example, the date when you first missed a payment (i.e. 30 days late) is known as the date of first delinquency. Most negative credit accounts cannot remain on your credit reports for much more than 7 years past the date of first delinquency.

After being 30 days late, you’ll normally then be marked as 60 days late, 90 days late, and so on. Once you hit 120 to 180 days late, your account is usually charged off.

Here’s the thing: Once an account is charged off, you typically cannot have additional late payments added, after the charge off notation. This means that if your account was charged off, the creditor is allowed to report the charge off. However, after the charge off, they cannot later add a 30 or 60 day late payment.

Let’s use an example. Suppose that your account went 30 days late in June of 2020. By November 2020, the account is 180 days late. In December 2020, it is charged off. Now, let’s say in January and February 2021, the account is reported as charged off. All of this is proper.

However, in March 2021, the account is suddenly reported as 30 days late. This is improper. Why? 

Well, the account was charged off and closed. Late payments typically only appear on open accounts. This doesn’t mean that the charged off account isn’t past due, or that you don’t owe money on the account. You do. 

It also doesn’t mean that the account cannot be reported as charged off each month, until it is paid or settled. The creditor can report an account as charged off, each month.

Keep in mind that the mere fact that a credit account is reported inaccurately, does not mean you have grounds to sue. In most cases, the account must be disputed with the credit reporting agencies, and then with the creditor. If it is still not corrected, then you can file a lawsuit. 

How do you figure out whether an account is being reported in an unlawful manner? We suggest having your credit reports reviewed by a qualified legal professional (such as an attorney or paralegal) for possible legal violations. Our team is happy to take a look at your credit reports, and see whether you might have grounds to sue. Schedule a call here.