When you have a charge-off on your credit report, it means you stopped making payments on your loan, usually for about six months. Your creditor gave up any hope of collecting the money you owed and wrote the transaction off as a loss, which shows up as a charge-off on your credit report. You still have an opportunity to pay your debt, which somewhat affects your credit report.

Your Options With Charge-offs

Once your account is in charge-off status, you have several options. You can do nothing, you can pay the charge-off amount or you can settle. When you get a charge-off, the lender you owe often can get a judgment against you. If you don't pay the judgment, creditors might be able to garnish your wages or your bank account. In addition, you might be charged interest on the amount of the judgment, attorney costs and court fees. The best thing you can do is resolve the debt, either by paying it off or by arranging a settlement.

What Your Credit Report Shows

If you pay the full balance you owe, your credit report will show that you paid your charge-off in full. Settling a charge-off means you offer to pay a percentage of what you owe instead of the full amount if the creditor agrees to close the account. If you do that, your credit report will list that the charge-off has been settled.

Charge-offs Are Negative

Charge-offs stay on your credit report for seven years, no matter how you handle them. Being delinquent on an account for so long that the creditor writes it off becomes part of your credit history. Future lenders have a right to know that happened. Although the charge-off remains on your credit report for seven years, a paid-in-full or settled status looks better to future lenders than having an outstanding charge-off on your record.

Time Is on Your Side

The more time that passes since the charge-off occurred, the better it is for you -- if you don't get any more charge-offs. Your score will continue to improve the longer you show you can pay your bills on time. As much as you'd like the charge-off to be erased from your credit report, only time can make that happen. As long as the information on your credit report is true, no one, not even you, can remove it.