My credit card was just charged off....?

Question

Hello,

My credit card was just charged off because I failed to make payments. The balance was $5000.

I now have $5000 to pay but the original credit card told me that I cannot pay them and I must go through the debt collection agency. Is this true? Doesn't it look better if i pay directly to the originator (Bank Of America)?


Also what happens to my credit score? I understand it will seriously hurt it, but after 7 years will I be able to get an apartment or a car if I show serious savings and a great credit history for 7 years?

Thank You,
Adam

Answer 1

Charge off is a accounting term that simply means that the original creditor did not think they would be able to collect so the charged off the account to profit and loss.

Once this happens, the account is sold to a collection company and the original creditor can not accept payment.

The good thing is that once the accounts are sold you normally can settle for less then the total amount owed since the collection company paid pennies on the dollar for your account.

As far as your credit is concerned if the collection company has not reported to the credit bureaus yet there is a chance that you can pay them and it will not even show on your report.

If they have, you can still ask for whats called a "pay for delete agreement" which means that you agree to pay and they agree to remove the account from your credit report.

If they have reported and they agree to this, get it in writing before you pay them a dime.

Answer 2

You do have to pay the collection agency because basically the credit card company has washed their hands of you and the debt agency now controls the record of whether or not you are making your payments.

The credit card won't always tell the collection agency if you made a payment so to keep things accurate, pay the agency.

If the collection agency becomes abusive, it is illegal. They can only call you for payments, not make threatening comments like "Wel'll ruin your credit if you don't pay us right now!!" Always ask for a supervisor and inform them that you will report them to the better business bureau for harassment. I told them they could only contact me by mail after I was driven to tears three times and had to climb up at least 2 supervisor levels. I also told them that they were ONLY to talk to my husband since I could not take the verbal harassment anymore. The agents make money by getting people to pay faster and in larger amounts. Do NOT let them bully you, remember that they are on commission basically. They cannot make up a different credit score than what you already have on record unless you break the payment agreement. The agency that called me turned out to have abuse lawsuits against them in 4 other states before I found out. That's when I threatened them with legal action.

Your credit score is indeed taking a hit, but if you keep it clean for 7 years it will drop off. Also, after making payments, you can ask that they change your score. Be sure to get a copy and read it over to see if you need to dispute anything. Or just want to dispute something.

Answer 3

Yes it is true. Once a credit card company sells your debt to a collection agency, it belongs to the collection agency and you must work with them to come to a settlement or payment arrangement.
Since Bank of America no longer has the debt, it's pointless to pay them. Your payments won't be applied to the original debt as it now belongs to the collection agency.
Your credit score (s) will suffer any time an account goes into default like that. You should be able to make strides to get things back in order in less than 7 years. The 7 year rule applies more for repossessions, bankruptcies and more serious blemishes.
Good luck!

Answer 4

They do pass on debts to creditors, once you fail to pay it doesnt matter where the debt is, its still the same mark on your credit score. If you make an effort to pay, start building credit, always have some savings,you will be able to establish new credit and finding an apartment wont be hard. Getting qualified for a new car, will mean a high interrest rate, this can all start now, dont wait 7 years.

Answer 5

Way back when I was doing credit & collections, you could refuse to do business with the collection company. i don't know how much that has changed, but we were instructed to back off if a debtor said they would deal only with the company and you had to follow up otherwise the deal was off.
Mind you this was about 10-15 years ago and this does not constitute credit counseling or advise, just my two cents.

Answer 6

Yeh they have handed it over to collections so you have to pay them. If you get it taken care of and rebuild your credit its not like a bankruptcy. As long as the future car loan payment or monthly rent is comparable to your income you should not find a problem though you will pay a higher interest rate.

Answer 7

ask Bank of America for a letter telling you who they sold the account to, with address and contact information.

That letter is your proof that you're paying the right party and not some fly by night "collection" outfit that discovered the chargeoff on your credit report.

Answer 8

If collections is in charge of collecting, you have no choice