What exactly is a charge off ? I've heard it is much worse than having something discharged in bankruptcy as far as one's abilty to re-establish credit. Also, how common is it for a charge-off to take place prior to bankruptcy ?
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A charge-off is when a lender decides it is no longer worthwhile to attempt collecting a debt from the debtor. This basically means you did not pay or attempt to pay the debt, therefore its a bad thing to have on your report. If you pay off your charge off, which I did many years ago with one I had, my credit was awesome within a year. In no time had an auto loan, motorcyle loan, and approved for every card I applied to, citi platinum, chase gold, all at low interest rates. Its pretty common to have charge offs before you file bankruptcy, as most of us never planned for bk to happen. Once the bk is discharged, the charge-offs go to zer0 balance, which gives a boost to your score. The only difference is, now you have a bk on your credit report, which will hold your credit back for years to come.
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