When creditors are unable to collect a debt for an extended period of time, generally 6 months or more, they will write it off their books. To the debtor, this will show up on their credit reports as a charge-off, which could remain for up to 7 years and will negatively impact their credit scores.
Finding a charge-off on your credit reports is bad enough, but what's worse is how your one "baddie" can quickly turn into two. You see, a charge-off doesn't mean the debt goes away. It still exists, and in most cases has just been transferred from your original creditor to a collection agency. Once it's in the collection agency's hands, they will then report the account as a collection as well. Which means your credit reports will show a charge-off and a collection, both for the same debt.
If you decide to pay off the debt with the collection agency, there's a chance you may be able to get the original creditor to remove the charge-off. However, they aren't required to remove anything as it's well within their rights to continue reporting the charge-off. That's exactly what it was for them, a charged-off debt, and many creditors will choose to keep reporting it as such despite a consumer's requests to delete the entry.
