Original account not updated when debt is paid through collection agency

Dear Experian,

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?



Dear PGR,

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

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