Do you have a question about consumer credit? You may find an immediate answer by using the search engine. If you can't find what you're looking for, please fill out the form, being as specific as possible.
Please note: The Ask Experian team cannot respond to each question individually. However, if your question is of interest to a wide audience of consumers, the Experian team will include it in a future column.
The information contained in this column if for educational purposes only and is not legal advice. You should consult your own attorney or seek specific advice from a legal professional regarding your particular situation.
Please understand that Experian policies change over time. Column responses reflect Experian policy at the time of writing. While maintained for your information, archived responses may not reflect current Experian policy.
Topics addressed on February 15, 2012:
Original account not updated when debt is paid through collection agency
When an account is paid off through a collection agency, why doesn't it show paid in settlement on the account with the original creditor as well as the collection agency account?
Your credit report reflects the history of a debt. If the original creditor sells the account to another lender, it would be shown in your credit report as “Transferred,” or “Sold to” and has a status of “charged off.”
This status indicates the original account is no longer the active account entry. That lender is not longer associated with the debt and will no longer provide updates on it. It remains in your credit report to provide a complete history of the debt.
The collection agency is now the legal owner of the debt and is responsible for providing any updates or changes in the, payment status of the debt. The collection account may also have a note indicating “Transferred from” or “Purchased from,” and will show the name of the original lender. The notation enables you to easily track the history of the debt and to identify the current debt owner.
When you pay off a collection account, you are paying the collection agency, not the original account holder. The collection account, which is the active entry for the debt in your credit report, will be updated to show paid in full; or, in the event the account was settled for less than the full balance, to show “Settled.” Because you did not pay the original creditor, a status of “Paid” or “Settled” on that original account would not be an accurate reflection of your payment history.
The original account and all subsequent collection accounts will remain on your personal credit report for seven years from the date of the initial missed payment that led to the charge off.
Thanks for asking.
- The "Ask Experian" team