A charge-off is an accounting measure that a creditor is permitted, and sometimes required, to take. Credtiors are given incentive to declare debt that is unlikely to be collected as a loss, in that it moves the debt from their receivable assets ledger. That is considered to be in the public interest, as it prevents a company from overstating their "real" assets to their shareholders or to prospective investors. Debt unlikely to ever be collected is not a likely asset.
Their "reward" for taking that accounting measure is that they can take a tax writeoff. However, it is really only between themselves and the IRS, shareholders, and investors Charging off the debt as having become a non-receivable asset does not, in any way, relieve the consumer of the continued responsibility for the entire debt. They can sell it, or refer it to a debt collector, resulting in the additon of a collection on top of the CO.
The impact for the consumer is that charge-offs can be reported to their credit files. That reporting is both scored negatively and places in their file the very derogatory statement that a creditor has determined that they are a consumer who is not going to pay their debt. That statement alone can be a huge disincentive for other creditors to want to lend to you.
Thus, as the consumer, I would view it as having a negative affect on both your score and any future manual review of your CR, while not relieving a penny of the debt, or preventing the creditor from continuiing to pursue the entire amount just as if it had not been charged-off. Subsequent payment of the debt does not require deletion of that prior reporting, so it can stay in your file for 7 years plus 180 days from date of your first delinquency on the account, and can only be removed if the creditor voluntarily agrees to its good-will deletion.
Avoiding a CO is highly desirable.
