Keeping Score

Who owns my debt?

Delinquent debts often get sold off to collectors, making it difficult to know whom you owe. But if the debt is valid, it's important to find out


When your credit card debt is charged off, it can be hard to know who owns it. But that’s immaterial as long as the debt is valid and the collector (an agency or the original lender) can verify that you owe them the money.

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Dear Keeping Score,

I have an old credit card debt. At the time, I lost track and didn’t realize that I wasn’t making automatic payments. The debt went to collections and was sold off by the bank. When I contacted the bank, wanting to pay it off in full, I was told they no longer own the debt, but also couldn’t tell me who does. I got various offers from different companies to settle the debt, but I could never figure out who owned the debt.

It’s been about two and a half years since this started and I haven’t dealt with it. I recently received a letter from the bank that originally issued the credit card and owned the debt offering to settle the debt for about a quarter of the original debt amount, but noting that it would be reported to credit reporting agencies as paid less than in full.

My question is, having gone to collections, been sold off and come back to the original owner, would it be better for my credit score to pay the debt in full or will it no longer make a difference? How long before my credit score improves?

Also, although it appears to no longer be relevant, how do you find out who owns your debt? Would paying a third party owner of a defaulted credit card debt in full have been useful for my credit score, or would it have no longer made a difference? —Mo

Dear Mo,

Your question is a great one because it allows me to address some key scoring points regarding debts in collection. However, I’d be remiss if I didn’t offer some advice along with the technical information you are seeking.

While wanting to know who owns the debt is understandable, please don’t lose track of the fact that ultimately it is you who owes the debt. Okay, now that I have that off my chest, here’s what you asked about.

The first point has to do with to whom you owe the debt. If the bank truly sold the debt to a collector you now owe the collector, not the bank. If the debt was just placed for collection, then you still owe the bank.

This is important because if you owe the bank, your credit utilization ratio will be affected, as you have no credit limit but a high debt. This results in a loss of scoring points.

If the credit card debt was sold to a collector, the bank will show both a zero credit limit and a zero balance due. This won’t hurt your utilization ratio, but in either case you got some heavy score damage from having a charge-off on your credit report.

Check out all the answers from our credit card experts.

Ask Steve a question.

No matter whom you owe, pay in full

Assuming this is the only skeleton in your credit file, you will be best served if you can pay the debt off in full, even at this late date. Having a notation on your credit report that says you settled for less than you owed is going to haunt you from an underwriting standpoint for years to come should you apply for a new loan like a mortgage or personal loan.

The score impact of a charge-off will diminish over time, but a prospective lender will see it until it drops off your credit report. If the account is settled or, worse, remains unpaid, future lenders are forewarned that your previous behavior resulted in a loss of income to a prior lender. That makes you look like a higher risk.

How collection items and charge-offs affect your score

Collection items listed on your credit report will almost always lower your score in a big way. Usually, items that are more than 90 days past due can be considered in collection, whether they are placed with an outside collection agency or if they remain in-house.

After you reach the 180-day mark, most companies will charge off the loan. This is more serious than that vanilla collection notation. Once the loan was charged off, the damage was done from a scoring point of view. I know it is easy for something to slip through the cracks, but we are talking about four to six months here, not just one. Setting up a system to check every account you own every month will keep this from happening.

I checked with Tommy Lee, principal scientist for FICO, about how charge-offs affect scores.

Payment history is the most important category in [your] FICO score, consisting of about 35% of the FICO score calculation,” he said. “Therefore, charging off on an account typically has a negative impact in this important category and could hurt one’s FICO score.”

Lee also noted that the “amounts owed” scoring factor, which accounts for 30% of your score, considers both high credit utilization ratios and high amounts of debt owed on delinquent accounts.

See related: What is a good credit utilization ratio?

Why do companies sell debt?

Credit card companies and lenders sell debt because they don’t want to deal with the hassles of collections. It distracts them from their main objective of acquiring and retaining good customers and making money.

Chances are that during the period before an account goes into collection, the original lender will have tried to contact the consumer to make them aware of the situation and to find a solution. If that fails, then they are ready to focus on more lucrative customers.

I’m not sure why you missed seeing any communication from the bank after you missed the first couple of payments, but that may be part of your “losing track” on this account.

How do you find out whom you owe money to?

Your credit reports will show this information. By law, you’re entitled to one free credit report from each of the three credit bureaus per year at And to help consumers during the COVID-19 crisis, the bureaus are offering a free credit report every week through April 2021. I recommend doing this at least annually, even if you don’t think you have any problems.

Examining your credit reports for false, incorrect or out of date information (or any information that you simply don’t recognize) will help you find problems and allow you to identify issues and correct them as soon as possible.

See related: How to dispute an error in your Experian credit report

When should you pay a collection agency?

It is generally always better to work with the original creditor, but this can be tricky as you found when you tried to do so at the beginning. In that situation, my advice is to ask to speak to a supervisor to see if you can’t get a better answer than the one you got. It may have been possible for the original creditor to have taken back the account depending on whether the account had been sold outright or just placed with an outside collector.

You were told the debt had been sold. It probably wasn’t, but whomever you spoke to didn’t know the difference. A supervisor would have known better. Regardless, now that the bank has reached out to you directly, you are going to want to deal with them. If you must ever deal with a collection agency, be sure to get written verification of the debt and keep good records of all your communications with the agency before you make any payments.

And if you can work out something with the bank, be sure to get those details in writing first (before you make a payment) as well. If it were me and I could afford it, I’d offer a full (not partial) payment in return for re-aging or reporting the account as current or paid as agreed. You’ll need a supervisor for this.

See related: 3 steps of credit card debt negotiation

What does re-aging mean?

Re-aging is the practice of changing the account status from delinquent to current on your credit report. This is not often done, but it can be an effective tool for a creditor to get a full payment, keep an otherwise good customer or cut a consumer a break in the event of extenuating circumstances. But it is fudging the rules. Still, it happens. It won’t hurt to ask.

Bottom line

Finally, I want you to remember that who owns your debt is somewhat immaterial as long as the debt is valid and the collector (an agency or the original lender) can verify that you owe them the money.

As for when your score will improve after you pay off this debt, only time will tell. To improve your score, you must pay all of your bills as agreed and on-time, keep your credit utilization in check, apply for new credit only when needed and, most of all, practice patience. If you can do that from now on, you will see your score improve over time.

Remember to keep track of your score!

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