A charge-off may be standing in the way of a good credit score

A charge-off may be standing in the way of a good credit scoreMany people do not realize that it is still possible to have a bad credit history even if consumers pay their bills on time and use credit responsibly. While recent history may be well and good, it is possible that an old charge-off could be the cause of poor financial standing.

Charge-offs are one of the most popular reasons that consumers are denied credit. This term essentially means that the lender does not expect the debt to be collected anytime soon, as the borrower's account has gone into severe delinquency after several months of non-payment.

Although the lender has declared that it is unlikely to receive repayment, the borrower is still responsible for the debt – the declaration is simply made for tax purposes so that the creditor can reports a loss.

This is a serious stain on your credit report, as it signifies to lenders that you may be a high-risk investment, and it will stay in your history for seven years as a "paid charge-off" once it is settled.

If you were previously unaware of the charge-off, make sure to review your financial records on a routine basis to avoid this situation in the future.