Charge-Off

You went to Cancun during college and signed up for a credit card with Capital One. They gave you a towel that said Spring Break 2002, because they ran out of 2005 towels, and had a bunch of the old ones left over. You used your first credit card with a $500 credit limit to purchase your first bottle service experience. You maxed out the card in one night.

Six months later, the credit card has called you 15 times. The collection agency has been leaving messages, and once they pull your credit, they realize that you don’t have the money to pay them back. You’ll receive a blistering note on your credit report that says you have no payment history.

But they’ll likely give up on the debt. This is called a “Charge Off.”

In this situation, the creditor will declare that the debt a credit card user has built will likely never be collected. See the popular video series "Credit Cards Gone Wild" for more information.