Even the best of us are likely to run into some time of financial problems at some point in our lives. If you have recently fallen on hard times, then you may find yourself unable to make payments on a debt that you owe. This could be anything from a student loan to a bill payment or anything in between. It is important to realize, however, the impact that failure to pay debts for an extended period of time can have on your overall credit score, which is a number that is used by banks to determine your worthiness for a car on credit. A good credit score can guarantee you a low rate on a car loan, whereas a low enough score could:

• Prevent you from getting approved in the first place
• Leave you stuck with a high interest rate
• Make it difficult for you to get approved

All About Charge Offs

What many people do not realize is that there are things called “charge offs” that can show up on a person’s credit report after failing to make payments on a loan for an extended period of time. A charge off is essentially a claim from a lender or creditor that they no longer believe, based on your payment history or lack thereof, that the debt will be paid off by the borrower.

A charge off can have a number of negative consequences for your credit. Mainly, having one of these on your credit report can drop your score significantly, this affecting your potential car loan finances in the future.

What to Do

If you have a charge off on your credit report, you may be under the assumption that it will go away after a certain period of time. Unfortunately, this is far from the truth. Charge offs, if nothing is done about them, will remain on your report forever. Thankfully, if you have them on your report and want to get rid of them so as to improve your credit score, the good news is that you can always hire a debt consolidation expert to assist you in having them removed.