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Topics addressed on December 23, 2009:
Defining charged off, written off and transferred
What are the definitions of charged off, written off and transferred?
Your question touches three important terms to understand in the context of a credit report. They are fairly self explanatory.
Charged off and written off mean the same thing. A charged off or written off debt is a debt that has become seriously delinquent, and the lender has given up on being paid. From an accounting standpoint, that means they remove that anticipated income from their accounts receivables ledger and document the loss as “charged off to bad debt” or “written off to bad debt” at that point.
The original account entry will show that it is charged off or written off. In credit reporting industry terms, charged off and written off are considered final status indicators for the account, meaning the account is no longer an active entry in your credit report. Examples of other final status indicators include “paid” and “closed.” Those terms indicate a loan was paid in full or that an account is no longer open or available to make purchases.
In most cases, the bad debt is transferred or sold to a collection agency for pennies on the dollar. It is then owned by the collection agency, which will try to recover as much of the debt as possible from the borrower. Your credit report reflects that account history.
A charged off account usually indicates it has been transferred, often with a statement that says, “Transferred to. . .” and listing the name of the new debt owner. The fact that it is a collection account means it would be scored negatively.
Your credit report will typically include a new account entry, most likely from a collection agency, for that debt. That entry will generally have a statement showing “Transferred from. . .” and listing the name of the original debt owner.
The entry showing “transferred from” is now the active account entry in your credit report.
However, the term transferred is neutral. It also can be associated with a positive history when the lender sold and transferred the account to a new company. There would be no negative impact from the transfer. Scores would simply reflect if all payments were made as agreed before and after the transfer.
Indicating who an account is transferred from and transferred to helps you more easily track the history of the debt from the original lender through subsequent owners of the debt.
Thanks for asking.
- The "Ask Experian" team