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Paying bills late under any circumstance will hurt a consumer’s credit history, but the longer the debt goes unpaid, the more it will sting.

If unpaid credit card debt gets to the point where the lender considers it unretrievable, that debt becomes what’s known as a “charge-off.” That negative mark will remain on the credit report for seven years from the date it is charged-off, which means serious consequences for credit scores.

Why Charge-Offs Hurt Credit Scores

In some states, credit card charge-offs are a big problem, accounting for as much as 5.75% of the state’s credit card balance. That’s the charge-off rate in Arizona, which has had a consistently high rate of credit card charge-offs in the past few years, according to Q2 2013 data from Experian-Oliver Wyman Market Intelligence Reports and Experian’s IntelliView tool.

Not only is that bad for consumers’ credit scores, it’s a financial hit to the lenders who will never see that chunk of money the customers borrowed (though the affected lenders are not necessarily in the same states as the consumers).

“Charge-offs are considered seriously negative and if one hits your credit score, it can tank,” said Gerri Detweiler, Credit.com’s director of consumer education. “Not only that, you may find yourself at the receiving end of intense collection efforts.”

What’s more, it makes a consumer incredibly unattractive to lenders.

“A charge-off indicates that you didn’t pay a debt, and if you can’t pay that debt, there’s a good chance you can’t pay others,” Detweiler said.

Like all blemishes to a consumer’s credit history, a charge-off can be somewhat offset by serious effort to rebuild credit. Individuals should look at their credit reports at least once a year — the government mandates everyone can access their credit reports once a year from each of the three major credit reporting agencies — to spot areas for improvement.

Consumers also have access to credit-monitoring tools to help them address their credit situation. For instance, Credit.com offers a tool that allows consumers to see their credit scores and analyze the strengths and weaknesses of their credit profiles on a monthly basis at no charge.

The 10 States With the Most Charged Off Credit Card Debt

In the second quarter of 2013, states of all sizes and regions topped the list for most charged-off credit card debt, and five of them have been on the list for three years in a row.

10. North Carolina (4.03% of credit card debt charged off in Q2 2013)

9. Oregon (4.15%)

8. Arkansas (4.18%)

7. Missouri (4.23%)

6. New York (4.3%)

5. California (4.35%)

4. Delaware (4.71%)

3. Florida (5.52%)

2. Nevada (5.7%)

1. Arizona (5.76)

The good news is consumers have had less of their credit card debt charged off in the past few years. Arizona cardholders, for instance, had 6.29% of their debt charged off in the second quarter of 2012 and 8.21% at the same time in 2011. But the state wasn’t No. 1 on the charge-off list either of those quarters.

Nevada held the No. 1 spot the past two years, with a 9.61% charge-off rate in Q2 2011, the highest any state has had in the second quarter of the last three years. Nevada and Arizona, along with California, Delaware and Florida, have ranked in the top 10 for the past three years.

While consumers in some states have had consistent issues, others made notable improvements. Mississippi improved its charge-off rate, having been in the top 10 in 2011 and 2012 but falling to 20th this year at 3.85%. Rhode Island, after hitting 6th last year at 5.16%, fell to No. 34 at 3.47% in 2013.

For reference, Alaska has the lowest rate at 1.94%, the only state with less than 2% of its credit card debt charged off.

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