Why did my paid-and-removed charge-off reappear on my credit report?

Dear Keeping Score,

I had an unpaid credit card debt that was charged-off and sent to collections. The collection account has been paid and removed.

However, the original creditor reported this as a charge-off in 2014. Now out of nowhere it’s showing up as being sent to collections in June 2018 and January 2019 and that’s killing my score.

I’ve called Experian and they simply cannot comprehend the problem. How do I fix this problem? Thanks. – Mark

Check out all the answers from our credit card experts.

Ask Steve a question.

Dear Mark,

I can see where you’d be confused. Let me try to explain what happened based on what you’ve told me.

Let’s begin at the beginning. The original creditor charged off the account in 2014; as a result, your credit report will list the negative account information for seven years from the date the account was last delinquent and was never brought current. So, in your case, you’d start the seven-year clock running six months before the date of charge-off.

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This means the account would normally drop off your credit report in 2021, or in about the next two years. Unless the original creditor had the charge-off removed by changing the reporting status to “paid as agreed” in return for your payment or to keep you as a customer or both, you should expect to see the charge-off on your report until it ages off.

That said, there could be a good reason for the disappearance and reappearance of the charge-off. Delinquent accounts are bought and sold in bulk packages all the time. As they move through the secondary collection market, it isn’t unusual for details about the account to be lost.

There are a number of possible reasons that the charge-off reappeared in June 2018. The one I think is most likely is a collector bought the charge-off in June 2018 from another collector, not knowing it was already paid. That could account for that relisting on your credit report. If in January 2019 it was repackaged and sold again to another collector at that time, that could account for the second listing.

See related:  Paid a charged-off debt; now what?

Contact the collectors and the credit bureaus

If the creditor has removed the charged-off account and sold it, then your beef is with the third-party collectors. I would do two things:

First, contact the collectors and show them the documentation the original creditor sent you when you paid off the account. Use certified snail mail with a return receipt. (I don’t recommend phone calls as they are hard to document and too easy to lose in the workflow of a busy day.)

That should end the issue. If they are responsible companies, they will remove their collection notations from your file and stop all collection actions.

If you don’t have anything in writing from the original creditor, contact them and ask for the old statement showing the account was paid. As always, be sure to keep a paper trail of everything you do. Resolving the collection issue is important because even though the account may not appear on your credit report in two years, as long as the collectors think this is a valid debt they will try to collect or resell your account for years to come.

Second, send the credit bureaus the same documentation you’ve sent to the collectors and include copies of any correspondence, again via certified snail mail with a return receipt. Yes, this will cost you yet more in both time and money, but both are well spent in order to improve your credit report situation.

Remember, the bureaus make their money selling information in a highly competitive industry. Selling inaccurate information will only hurt their business, so they place a premium on getting the data right. Your job is to get them the information they need to make the change – not to try to force them to make a change without documentation. You both want the same thing.

See related:  Minimizing score damage after a charge-off

Check your other credit reports to find out what’s hurting your score

I also wanted to correct your assumption that the 2018 collections notation is ruining your credit score. It’s not.  Once your account was charged off in 2014 the damage was done. Your score took a huge hit there and then. A charge-off ranks just below a bankruptcy in impact in terms of scoring damage. Whether the account went to inside collections or was sold to an outside collector makes no difference to your score.

It’s all the same account and the same delinquency. So you only get a negative hit to your score for a single charge-off once. Furthermore, as time has passed the negative impact of the charge-off counts for less. So, there must be something else killing your score that you haven’t noticed.

I suggest you check your credit report from the other two credit bureaus, Equifax and TransUnion, to see if the same information is listed there and get a score from all three. You can get one free copy of your credit report from each bureau per year at AnnualCreditReport.com.

Whatever you do, the charge-off and the collections notations will drop off your credit report and stop affecting your score within the next two years.

Remember to keep track of your score!