topic Re: Charged Off vs. Collection in Rebuilding Your Credit

Charged Off vs. Collection

Anonymous — Fri, 18 Nov 2011 17:21:04 GMT

Is there a difference between an account that is charged off versus one showing as a collection? For the past year I have had a hard time to get EQ to update my student loan account. It was charged off (and show charged off) however it has since been paid (over a year now) but still reports a balance of $14112. I am in the process of disputing (have done three times thus far) so I contact Citibank, who is the former account holder, to update. I am wondering will my score change when the balance of zero is reported accurately. I know scores don't change for a paid collection but was wondering if it is the same for a charged off installment account such as a student loan. Thanks for assisting me with this question.

Re: Charged Off vs. Collection

RobertEG — Sat, 19 Nov 2011 03:36:18 GMT

A big difference.

A charge-off is a reporting by the creditor of an internal bookeeping measure that they took. The wrote off the debt as "uncollectible" to shift it on their accounting ledger from a receivable asset to an uncollectible liability, thus gaining a tax writeoff.

A charge-off really has no subsequent effect on either the debt or how its collection is pursued. It does not excuse the debt in any way. You still owe it, and even the creidtor who did the charge-off can continue to attempt to collect the full amount, either themselves or by referral to a debt collector.

If a debt collector becomes involved, they have the right to report their collection activity to the CRA. The presence or lack of a prior CO is meaningless to the collection process and its reporting to the CRA.

If the debt is paid, removal of a prior charge-off must be pursued with the OC, and removal of a reported collection must be pursued with the debt collector. One is separate from the other, and their reportings are cumulative.

Re: Charged Off vs. Collection

Anonymous — Sat, 19 Nov 2011 14:30:11 GMT

@RobertEG wrote:
A big difference.
A charge-off is a reporting by the creditor of an internal bookeeping measure that they took. The wrote off the debt as "uncollectible" to shift it on their accounting ledger from a receivable asset to an uncollectible liability, thus gaining a tax writeoff.
A charge-off really has no subsequent effect on either the debt or how its collection is pursued. It does not excuse the debt in any way. You still owe it, and even the creidtor who did the charge-off can continue to attempt to collect the full amount, either themselves or by referral to a debt collector.
If a debt collector becomes involved, they have the right to report their collection activity to the CRA. The presence or lack of a prior CO is meaningless to the collection process and its reporting to the CRA.
If the debt is paid, removal of a prior charge-off must be pursued with the OC, and removal of a reported collection must be pursued with the debt collector. One is separate from the other, and their reportings are cumulative.

RobertEG - The debt (charge off) is paid and has a zero balance however it is reporting with a $14112 balance which I have asked Equifax to verify however three times they have claimed to verify a balance but I know this is not possible since their is no balance so I sent a letter to the OC and is awaiting them updating Equifax. Do you know if when the account goes to a zero balance if I will see an improvement in my score or is it equivalent to paying a collection account?

Re: Charged Off vs. Collection

Anonymous — Sun, 20 Nov 2011 20:20:25 GMT

Does anyone know the answer to my above question?