Consumers are often surprised when they pull their credit reports and find that one of their old debts is listed twice under different creditors' names. How can this happen?
It's actually quite simple. In most cases, the debt is listed as both a charge-off and a collection on the individual's credit reports. The original creditor reports it as a charge-off when it writes off the debt as uncollectible and sells/transfers the account to a collection agency. Next, the collection agency that receives the account then reports a collection to the major credit reporting agencies as well.
This double-whammy to your credit score is one reason why it's so important to keep your accounts out of collections at all costs! Not only are original creditors generally much easier to work with than debt collection agencies, but the effects of a settled account with the original creditor will be much less harmful to your credit scores when it's not accompanied by a collection too.
