Notice of Cancellation - But Debt Still Shows On Credit Report

Reader Question: "A few years ago a debt collector tried to collect a debt. I requested verification and it was not provided. I received a Notice of Cancellation stating the account was being returned to the original lender. Now, several years later, the account is being reported as derogatory and the collection / charge-off appears on my credit report. Can they do this since the debt was never verified and I received a Notice of Cancellation. I would like this item taken off my credit report. What can I do?"

The notice of cancellation does not mean that the debt was forgiven. It's just the debt collector's way of saying, "We don't own this account anymore. We are giving it back to the original creditor." So it's legal for the negative entry to stay on your credit report, even though you received a notice of cancellation from the collection agency.

Now if the debt is entirely illegitimate, then you can dispute it through the credit reporting agencies who produce your reports. But you won't have much luck disputing it just because of the notice you got from the debt collector.

If you believe the negative entry is erroneous, then I would dispute it. When you initiate a dispute through Experian, TransUnion or Experian (whoever produced the report in question), they are obligated by law to verify the negative entry. If they find that it's an error -- or if they are unable to verify it one way or the other -- they have to remove the item from your credit report.

Hope that helps.