It’s a common misconception that if a bill is charged-off on your Credit Report it is no longer due. WRONG the Debt is still owed. If the creditor is unsuccessful in getting the account paid, it is written-off their books as a loss. The creditor has now categorized this account as late stage delinquency, and is sold for cents on the dollar to a third party collection agency for them try to collect.
The next step is the collection agency will contact you for payment of the bill. Now you are dealing with the collection agency, which is usually more aggressive than the creditor. They will call you and send you a verification of the bill and frequently stretch the law in trying to get you to pay something.
If all else fails the Collection Agency may choose to sue you for the amount owed plus penalties. This could result in a Judgment against you.
IMPACT MULTIPLIED BY THREE
This result leaves you with 3 dings against you on your credit report. Each of these will have severe negative impact on your credit score, and remain on your credit report for seven years.
1. You will have the original information on the bill that was charged-off by the creditor.
2. A new account is created by the third party collection agency, which is categorized as a collection account on your credit report.
3. If the collection agency decides to sue you, a judgment is reported in the courts and shows up on your credit report.
You can see there is a snow ball effect of not paying a bill. This can have a major impact on your credit and take years to recover.
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