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You have the dreaded double whammy on your credit reports—a charge-off and collection for the same old debt.  But how did this happen? Frankly, the whole process can be quite confusing to most consumers, which is why I've done my best to break it down into the following six simple steps.  While your situation might be a little bit different, my experience has been that 90% of the time this is exactly how it all plays out.

Why You Have a Charge-Off and Collection for the Same Debt

1. The original creditor charged off your credit card account because you stopped paying and they considered it a business loss.  They report it as a charge-off to the major credit reporting agencies.
2. The original creditor decides to make a few bucks on your uncollectible debt so they sell it to a collection agency that specializes in buying charged-off debt. Note that the debt could also be transferred instead of sold.
3. The collection agency reports the account as a collection to the credit bureaus in hopes that this will anger you even more and prompt you to pay up.
4. Now you have a legitimate charge-off and a collection on your credit reports for the same debt.
5. The collection agency is badgering you and you want to finally take care of the debt, so you pay off your outstanding balance to the collection agency.
6. You're surprised to find out that after paying off the debt both the collection and the charge-off remain on your credit reports.

If you've been in this situation before, you know just how frustrating it is.  Many people assume that the negative entries on their credit reports will simply go away after they make payment to the collection agency, but this just isn't the case.  In fact, the negative marks can remain for up to 7 years from the first date of delinquency, even if they're already paid off. So, how can you try to responsibly take care of your old debts while avoiding negative entries on your credit reports for the next 7 years?  Stay tuned, because I'll be covering this question in a follow-up post later this week. If you have immediate questions you want answered, try joining our Credit Talk Forum today where there are over 30,000 members waiting to offer their support and advice.  Once you check out our community, I'm sure you'll want to be a part of it. And it's free, so why not give us a try?