It’s discouraging enough when you can’t pay a debt and you know that it’s going to damage your credit score for years to come. But what about when a single debt multiplies, turning into two, three or even more negative items on your credit reports? A discouraging situation can turn downright miserable.
Find out why there may be an original creditor and collection agency on your credit report and if there’s anything you can do about these situations.
Can a Collection Agency Report an Old Debt as New?
Unfortunately, a collection agency can often report old debt as new. “I see these double jeopardy tradelines all the time,” says Michael Bovee, founder of the Consumer Recovery Network. He goes on to explain how it works.
Let’s say you fall behind on an account and your creditor charges off your account. Your credit report will now list a charge off, which is very negative for your credit score. Then, the creditor will sell the debt to a collection agency, which also reports the debt as a collection account.
〉Read more: What Does Charged Off as Bad Debt Mean?
〉Read more: How to Remove Collection Account from Your Credit Reports
Now, you have two negative accounts. Both the original creditor and collection agency will be listed on your credit reports. That’s strike number two against you. It’s frustrating, but it’s not illegal. Here’s the one bright spot, though: if the original creditor sold the debt to a collection agency, then according to fair credit reporting practices, it should not continue to report a balance owed. “That’s double the damage and is not permitted,” says Bovee. There will be a history of that balance, but not an active balance owed.
How Long Can Multiple Accounts Impact Your Credit?
The original creditor can’t continue to report a balance due if it has sold the account to a collections agency. However, it can report a charge off, which remains on your credit report for seven years, even if you pay off the debt—with the original creditor or via a collections agency.
But the debt may continue to impact your credit for longer than those seven years because the collections company can also place an item on your credit report. Depending on how the account is handled, whether it’s within the statute of limitations and whether you attempt to negotiate or pay the debt, the item can appear on your credit report for as long as around seven-and-a-half years from the last payment activity.
How Often Do Collection Agencies Report to Credit Bureaus?
Collections agencies can report to all three of the credit bureaus almost as soon as they purchase the debt. They can then report monthly on the status of the debt for seven years and 180 days from the date they took the account.
〉Learn more: Collections Crash Course
Actions to Take When Accounts Show Up Multiple Times on Your Credit Report
Luckily, you’re not left without options if you find yourself in this double jeopardy debt situation. First, consider ordering your credit reports so you understand the situation and what information is showing up there. You can request your credit score for free annually from each of the credit bureaus. You can also check it regularly with Credit.com’s free Credit Report Card. Then, you can make an informed decision about next steps, which might include one of the options below.
〉Sign Up Now: Free Credit Report Card
Pay Off the Debt
If you know that the debt is valid, you may be able to negotiate a settlement payment with the original creditor. If they have already written off the debt, they may accept a lower total payment. This is especially true if fees and interest have inflated what you originally owed.
If you satisfy the original debt, you can request that the collection agency stop contacting you. You may also be able to request that the collection agency item be removed from your credit report, although the charge off will remain. Collection agencies often buy debt for less than the original owed, so you may be able to negotiate a lower payment with a collection agency if necessary.
Dispute Inaccurate Items
If you can prove that the reporting isn’t in line with the Fair Debt Collection Practices Act, the collections agency may remove it. However, it can be difficult to get a collector to back down, and you may want to bring in assistance such as an attorney who works with credit repair.
Here are some actions you can take to address and dispute duplicate items on your credit report.
1. Require Validation of the Debts
Under the Fair Debt Collection Practices Act, debt collectors must send you a written notice of the debt within five days of initial contact with you. After that, you have thirty days to request verification of the debt. If you request verification of the debt, the collection agency should provide enough information to establish that the debt is legitimate and accurate.
Send validation letters via certified mail or other confirmation delivery method to each of your debt collectors. Ask them to identify the original creditor, current owner of the account, current balance and date of last payment.
2. Dispute Collection Accounts That Don’t Appear Accurate
Send dispute letters, again by delivery confirmation, to any of the debt collectors who have responded with information that doesn’t appear accurate or is unfamiliar. Your letter does not have to be fancy or detailed, but it must state that you dispute the debt.
〉Take Action: How to Dispute Credit Report Errors
This dispute then requires the debt collector to list the account as disputed on the credit report. This notation reduces the harmful effect of the trade-line on your credit score. If the debt collector fails to mark the account as disputed, you have a cause of action under the Fair Debt Collection Practices Act.
3. Get Help with Credit Repair
Once you determine that something isn’t quite right on your report, consider getting professional assistance in disputing issues and repairing your credit. A professional credit repair agency like Lexington Law can help you negotiate errors and fix your credit whether you’re dealing with inaccurate data or illegal or unfair reporting practices.
How to Deal with Double Jeopardy Tradelines
If an original creditor and collection agency appear on your credit report, don’t fret. You still have options. Request validation of the debt, work with a credit repair company if necessary to remove inaccurate items, and pay off the debt as quickly as possible to avoid incurring more debt.