Collections & Charge-Offs
When it comes to charge-offs and collections both can really impact and harm your credit score. Having numerous of credit cards, high balances, and late payments affects your score negativity as well. When an account reaches the point that creditors turn your account over to a collection ion agency it has already caused your credit harm. Collection agencies are hired by creditors to collect on accounts. Most creditors turn accounts over to collection agencies when the account reaches 90-180 days past due. Collection agencies will try to collect as close to 100% of the amount owed as possible, because a percentage of the amount collected goes to the collection agency. By the account reaching a collection status it can be displayed on your credit report twice, once by the creditor and once by the collection agency. This can cause your score to drop by nearly 75 points. That's a huge drop on a credit standpoint.
If creditors determine your account is uncollectible the process of a charge off takes places and the account is closed, sold or transferred. This means the creditor will “write off” this account. However, if you ever plan to get any other credit it will be hard based off another creditor has classified you as unworthy of maintaining credit. But there are other creditors that will extend credit to you with a collection and/or charge off but the interest rate will be outrageously high. Please be smart about your credit because if you are not the cycle could repeat itself in another round of collections and another charge off.
Santasia H~
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