What Does Transfer Sold Mean on a Credit Report?

Each account that appears on your credit report does so within a trade line. The trade line contains all of the information the creditor reported to the credit bureaus about your account and includes the amount you owe, the creditor's contact information and the current status of the account. Trade lines on your report that list a status of "transferred" or "sold" are no longer owned by the account's original creditor.

Account Status

A creditor reports an account as "transferred, sold" when it sells the account balance to a third party. When a debtor refuses to pay, selling nonproductive accounts reduces the original creditor's financial loss. Collectors purchase unpaid accounts for far lower than the amount the consumer actually owes. The original creditor then writes off any balance that remains as a loss when it files taxes.

It isn't only original creditors, such as banks and credit card providers, that transfer debts. Collection agencies sell debts they cannot collect to other collectors. Thus, both an original creditor's trade line or a debt buyer's trade line can reflect that your unpaid debt was sold.

Collection Accounts

Not all unpaid debts that a creditor transfers to another company are sold to that company. Instead of selling the debt, the creditor has the right to hire a third party to recover the debt on its behalf. Should this occur, the account status may read "transferred, closed" or simply "transferred."

If a creditor maintains ownership of a debt and the collection agency it hires successfully collects the unpaid balance, the collection agency does not have the right to keep the recovered amount as it would if it had purchased the debt from the original creditor. Rather, the collector transfers payment to the creditor that then pays the collection agency a commission for its work.

Credit Reporting

Collection agencies often report accounts they purchase to the credit bureaus. If the original creditor's trade line notes that it transferred and sold your debt, it's a fair bet that the debt collector that purchased the debt also inserted a trade line into your credit file. Because collection accounts have a negative effect on your credit score, your ability to obtain new credit will decrease after an account is sold to a collection agency and the collection agency reports the debt to the credit bureaus.

Time Frame

All trade lines on your credit report, regardless of their status, are subject to federal credit reporting periods set by the Fair Credit Reporting Act. Accounts that reflect a status of "transferred, sold" are derogatory by nature and, according to the FCRA, must be deleted after seven years and 180 days. When the credit bureaus remove the negative trade line from your credit history, your credit score will improve.