 TITLE: What Is a Charge-Off? CONTENT: The Difference Between a Charge-Off and Collections\n---------------------------------------------------\nOnce a creditor has charged off an account, it often sells the debt to a third-party collection agency, which then takes over efforts to collect what's owed. If this happens to you, two changes will appear on your credit report: The balance owed on the charged-off account will change to zero, and a new entry will appear in the credit report in a section headed \"Collections.\" The collections entry—yet another derogatory item in your credit file, which may cause further incremental reductions in credit score—will include contact information for the collection agency.\nYou'll probably know about these changes long before you see a credit report, because you will likely be bombarded with letters and phone calls. Collection agencies are notoriously aggressive and relentless in pursuit of their money—and in fact, the debt you once owed to your creditor is now owed to the agency. Any effort to settle the debt will have to be arranged through them. END