@RobertEG wrote:
+1.
A charge off is an internal bookeeping measure taken by the creditor to move a delinquent debt from a receivable asset over to an uncollectible liability, thus improving their bookeeping for tax purposes. The consumer normally has no knowledge of when a creditor does such an internal business practice, and is not part to that process. The creditor is not requried to keep you advised of their internal business dealings. It is not a classic separate delinquency in the sense that it does not result directly from a date of consumer noncompliance with any terms of their account agreement.
As such, in my opinion, charge-offs have no business in the credit reporting process. They are really nothing more than the creditor's opinion on how they view the debt (they must assert that it is now "uncollectible" in order to do a charge-off). It is hard to deal with an opinion. Nonetheless, the CRAs accept the reporting of charge-offs, and FICO considers them to be a risk analysis indicator, so they score them.
When the creditor reports a charge-off, the date of their reporting does not have to coincide with the date of their actual internal business transaction of the charge-off itself. You dont know when they did the actual procedure of the charge-off. If a prior charge-off was done, it can reported at any time thereafter. All that is required for accuracy of their reporting is that they did a prior charge-off.
The reason Charge Offs exist is that under GAAP (Generally Accepted Accounting Principles) financial institutions are required to no longer count credit accounts as assets after a given period of delinquincy. After the pre-determined timeframe goes by, they must charge off the account from their assets and mark it as a loss (and they hope that their actual losses do not exceed the accouting loss reserve they set asside on their balance sheet to account for expected losses).
Generally speaking the delinquincy periods under GAAP should be very similar at every financial institution for similar credit products and accounts, but they can vary by financial institution (but generally only for to shorten the timeframe). Quoting Wikipedia (http://en.wikipedia.org/wiki/Charge_off):
"In the United States, Federal regulations require creditors to charge-off installment loans after 120 days of delinquency, while revolving credit accounts must be charged-off after 180 days."
Now, the way you can both get a CO and PIF the same month works something like this.
1st of the month: Revovling account becomes 180 days past due
2nd of the month: Account becomes 181 days past due and under GAAP and federal banking regulations the account must be no longer considered collectable, so it is charged off the banks assets and becomes a loss. The bank reports the account as a CO to the CRAs.
15th of the month: You PIF. The bank strikes the loss it took, records the revenue and it updates the CRAs to reflect the updated balance -- zero from whatever it was.
