After a Charge-Off
Once your account is charged-off, you will no longer be able to make purchases with the account. However, you still owe the charged-off balance.
The creditor will report a charged-off account status to the credit bureaus. This status will remain on your credit report for seven years from the date you first went delinquent. In the future, when creditors and lenders pull your credit report, they'll see you once were late enough to have a charge-off.
Your credit score will drop after a charge-off. Payment history weighs heavily in the calculation of your credit score. An unpaid charge-off will affect your credit score more when it first happens. As time passes, your credit score can improve if no additional negative entries are placed in your credit report.
How To Avoid a Charge-Off
Avoiding a charged-off account is easier than you might think. All you have to do is make the minimum payment on your accounts each month. Each month you're late on a payment, you're one step closer to having your account charged-off.
Get caught up on delinquent accounts, especially if they are four or five months late (120-150 days). Expect to pay more to bring your account current because of the missed payments and late fees. It's better to pay the money now than to deal with the results of a charged-off account for years to come.