Content of the material
- How Long Does a Collection Account Stay on a Credit Report?
- Debt Validation
- Can paying off collections raise your credit score?
- FICO 9 & VantageScore 4.0
- When All Else Fails
- Credit Bureau Dispute Information
- 4. Negotiate a Pay-for-Delete Agreement
- How to Negotiate a Pay-for-Delete Agreement
- Can a collection agency report an old debt as new?
- Check the Validity of the Collection Account
- What Happens When an Account Goes into Collections?
- Dispute the Debt
- Dispute After 7 Years
- How To Deal With Debt Collectors When You Cant Pay
- 3. Choose a Plan of Action
- 1. Dispute Inaccurate or Incomplete Collection Accounts
- 2. Ask for a Goodwill Deletion
- 3. Wait Until It Falls Off
- Can I Dispute Accurate Information From My Credit Report?
- 1. Send a request for “goodwill deletion”
- 2. Work with a credit counseling agency
- Are pay-for-delete negotiations worth it?
- Avoid the following strategies
- Closing a line of credit that is already behind on payments
- Filing for bankruptcy
- Meet the Experts
How Long Does a Collection Account Stay on a Credit Report?
The Fair Credit Reporting Act lays out that the collection has to stay on your credit report for up to seven years from the date of default on the original account. This is to give lenders a clear picture of your financial behavior so they know the risks of lending you money.
However, on a credit report, a paid collection can still stay on your credit report for up to seven years, regardless of whether the account has a $0 balance.
After seven years, the paid collection will automatically drop off your credit report.
The best way to start is to send a validation request to the debt collector claiming you owe them money. First, this step requires them to stop all collection activity.
The debt collection agency must then validate the debt and prove that you do indeed owe it. There’s no timeline for them to return this information to you, but they can’t take any action towards collecting the funds until they do.
Can paying off collections raise your credit score?
In the past, paid collections on your credit report were treated the same way as unpaid collections. However, FICO has updated its credit scoring to ignore paid collection accounts. Similarly, VantageScore has recently updated its algorithm to ignore paid collections of all types.
With these new updates to the credit scoring models, paying off a collection does now help your credit score. However, since it takes time for new credit scoring models to be rolled out in financial institutions, it may take time for you to see a result when applying for credit.
FICO 9 & VantageScore 4.0
You can always ask potential creditors which credit scores they use. If it’s FICO 9 or VantageScore 4.0, you should be able to take advantage of the lenient calculation of paid collections.
It’s still important to be careful before you decide to pay off a collection account if you still owe it.
Debt buyers will attempt to collect on debts that you don’t legally owe anymore, so it’s important to have them verify the debt before you take action. Also, consider your state’s statute of limitations, which we’ll discuss shortly.
When All Else Fails
If you’re not able to get the collection account removed from your credit report, pay it anyway. A paid collection is better than an unpaid one and shows future lenders that you’ve taken care of your financial responsibilities. Once you've paid the collection, wait out the credit reporting time limit, and the account will fall off your credit report.
To be sure, however, consumers can request their own credit report for free every 12 months from the three major reporting agencies. It is worth checking your report to be sure the negative information has been removed. It's also important to note that the information may still be kept on file and can be released under certain circumstances, such as when applying for a job that pays over a certain amount or applying for a credit line or a life insurance policy worth a lot. You should also check with your state Attorney General's office for more information, as state law may offer additional protections.
Credit Bureau Dispute Information
TransUnion Consumer Dispute Center
- P.O. Box 2000 Chester, PA 19016
- Tips for disputing your Transunion credit report
- Phone: 800-916-8800 – 8am-11pm EST
- P.O. Box 4500 Allen, TX 75013
- Tips for disputing your Experian credit report
- Phone: (714) 830-7000
Equifax Information Services LLC
- P.O. Box 740256 Atlanta, GA 30374
- Phone: (800) 846-5279
4. Negotiate a Pay-for-Delete Agreement
When your original creditor can’t collect your past-due balance, it’ll sell your debt to a debt collection agency which means you now owe the money to the agency.
But when the agency buys your debt, it doesn’t pay the full amount. It may pay only a fraction of what you owed on your original debt.
If the collection agency can get you to pay off the debt, it makes a profit. As a result, you could leverage a payment in your negotiations.
How to Negotiate a Pay-for-Delete Agreement
You offer to pay part of your balance due in exchange for getting all negative information related to the debt off your credit report.
For this to work, you have to get this agreement in writing. An agreement over the phone won’t hold up. You could do your part and pay the agreed-upon amount only to learn the agent you spoke with didn’t make a record of the deal.
Now, if you owe $30,000 on an old credit card charge-off, you’d have a hard time coming up with a lump sum so large. Even 30 percent would still be $9,000. But this pay-for-delete strategy can help when you can afford to make a payment.
Late payments can be reported separately even though it’s associated with the same debt. Though, if you negotiate with your creditors to get a collection account removed, be sure all the negative data goes away.
Can a collection agency report an old debt as new?
Collection agencies cannot report old debt as new. If a debt is sold or put into collections, that is legally considered a continuation of the original date. It may show up multiple times on your credit report with different open dates, but they must all retain the same delinquency date. They should also all be discharged on the same date — seven years after the original open date.
Check the Validity of the Collection Account
When you examine your credit report for inaccurate information, ask yourself whether each debt is yours and whether each debt amount has been correctly reported. A recent report from the Bureau of Justice Statistics states that 17.7 million people in the United States, 16 and older, are victims of identity theft annually.
The Federal Trade Commission (FTC) reports that imposter scams and identity theft are the two biggest categories of fraud. The first thing you should do when you’re contacted by a collector seeking your money is to check the validity of the account. But do it fast. The Fair Debt Collection Practices Act only gives you 30 days from the first contact to confirm the validity of the debt. A debt collector must stop collection activity for 30 days if they get a request to validate an account. Keep in mind that one original creditor account can pass through the hands of different collection agencies and debt buyers, so you could have an “initial contact” from different agencies for the same debt.
Debt collectors are required to tell you within five days of initial contact the amount you owe and the name of the original creditor. They must also provide statements which confirm that you have 30 days to contact the collector to dispute the debt and that if you request information about the original creditor, the collector must provide you with the information you need to do so. If you haven’t received these statements from the company trying to collect your debt, (check the small print), then the collector may have violated the Fair Debt Collection Practices Act.
If you want to request validation of new debt, send a letter to the collection agency with the account information and tell them that you dispute the validity of the debt. Ask them to provide information to verify the original account and the debt amount, and make sure to request contact information regarding the original creditor.
An account in your credit report may not be yours. You can dispute an account with the credit bureaus, and make a report to the Federal Trade Commission (FTC) and Consumer Financial Protection Bureau (CFPB) if you discover that you’re a victim of fraud.
What Happens When an Account Goes into Collections?
Step by step, here’s what happens when you have an account go into collection:
- You miss or skip a credit card payment or fail to pay another type of bill, such as your phone bill or electricity bill.
- The creditor may give you a grace period during which to make good on the bill. Typically, it takes longer than 30 days for an account to be sold to a collection agency or placed into collection status. They’ll notify you, usually more than once, that you haven’t paid and ask you to pay up. If you still don’t pay, they can move your account into collections.
- At that point, the original creditor could turn the collection account over to a collection agency. Typically, this occurs within a few months of the original delinquency date, and the original account may appear on credit reports as a “charge off,” which essentially means the creditor has given up trying to recover the debt.
- Just because the original creditor has given up, however, doesn’t mean you won’t hear from a collection agency. Once they receive the account from the original creditor, the collection agency is free to pursue you for all or part of the debt, provided they adhere to federal regulations governing collections.
- If you’re contacted by a collection agency, you have the right to the detailed accounting of the debt they claim you owe. Contacting a collections agency won’t impact your credit report.
Virtually any type of unpaid debt can be sent to collection, including:
- Credit cards
- Student loans
- Auto loans
Dispute the Debt
Perhaps the interest rates and late fees were calculated incorrectly, or late payments were not marked as paid. Perhaps there are two medical offices with the same name. There are many reasons to dispute a debt. Even if the debt for the collection agency account belongs to you, you can still dispute the validity of the information noted on your credit report using online dispute forms on the websites for Experian, Transunion, or Equifax. You can also write a short letter to the bureaus telling them that you dispute the debt.
When you dispute a debt, the credit bureau has 30 days to confirm that the debt is valid and accurate. If the debt is not fully accurate, it must be removed from your credit report. You also have the option to write a goodwill letter and request a goodwill deletion. Simply write the company a polite fact-based letter explaining the situation and ask for a goodwill deletion.
Dispute After 7 Years
According to the Fair Credit Reporting Act (FCRA), past-due accounts can only remain on your credit report for seven years from the first date of delinquency. Sneaky collectors often try to re-age a debt, making it look like the account became delinquent later than it did. This re-aging keeps the debt on your credit report longer.
If the seven-year reporting period is up (starting from when you first went delinquent with the original debt), dispute the debt from your credit report. Any proof you have regarding the first date of delinquency will strengthen your dispute.
How To Deal With Debt Collectors When You Cant Pay
If you have debt you can't pay, you still have options. Under the FDCPA, debt collectors can't harass you, and are there are restrictions on when they can contact you. Because debt collectors are under pressure to collect, you may be able to negotiate a settlement and payment plan.
3. Choose a Plan of Action
Here are three actions you can take to attempt to remove collection accounts listed on your report.
1. Dispute Inaccurate or Incomplete Collection Accounts
If you have inaccurate or incomplete collection accounts on your credit report, the Fair Credit Reporting Act gives you the power to dispute this information directly with the credit bureaus or creditor. You can send a dispute using the dispute form on each credit bureau’s website. The Federal Trade Commission has sample dispute letters on its website if you need help crafting one.
After you submit your dispute, a credit reporting company has 30 days to investigate your claim. If the credit bureau finds the provided information correct, the collection account will be removed from your report. However, if it finds that the company reporting the information was correct, the collection account will stay on your report for up to seven years.
2. Ask for a Goodwill Deletion
If you have a paid collection listed on your report, you can simply ask the debt collector or original collector to remove the collection. This usually involves sending the debt collector or collection agency a goodwill deletion letter explaining your mistake, asking for its forgiveness and showing them how your payment history has improved.
With this option, there’s no guarantee your collection will be removed from your credit report, but it’s worth a shot. If the account is removed, it may help you qualify for better terms on personal loans, mortgages and credit cards.
3. Wait Until It Falls Off
When the debt in question is legitimate and you can’t convince the debt collector to delete it from your report, your only remaining option is to wait. After seven years from the date the account first became delinquent, the collection should fall off of your credit report.
Although this means the collection will continue to impact your credit score; its impact will lessen as time passes.
Can I Dispute Accurate Information From My Credit Report?
Accurate items in your record can’t be disputed or removed before the term set by law (seven years for most negative items). For example, if you missed payments on your credit card or defaulted on a student loan, your dispute request will be denied.
If you do have valid negative items on record, here are some things that might help:
1. Send a request for “goodwill deletion”
Writing a goodwill letter can be a viable option for people who are otherwise in good standing with creditors. If you’ve taken steps to pay down your overall debt and have been paying your monthly bills on time, you might be able to convince your creditor to “forgive” the late payment.
While there’s no guarantee that the creditor will delete the derogatory information, this strategy does get results for some. Goodwill letters are most successful for one-off problems, such as a single missed payment. However, they are not effective for debtors with a history of late payments, defaults or collections.
When writing the letter:
- Take responsibility for the issue that lead to the derogatory mark
- Explain why you didn’t pay the account
- If you can, point out good payment history before the incident
2. Work with a credit counseling agency
Several non-profit credit counseling organizations, like the National Foundation for Credit Counseling (NFCC), can help dispute inaccurate information on your record.
The NFCC can provide financial counseling, help review your credit history, help you create a budget and even a debt management plan free of charge. It also offers counseling for homeownership, bankruptcy and foreclosure prevention.
As always, be wary of companies that overpromise, make claims that are “too good to be true” and ask for payment before rendering services.
When looking for a legitimate credit counselor, the FTC advises consumers to check if they have any complaints with:
- Your state’s Attorney General
- Local consumer protection agencies
- The United States Trustee program
Are pay-for-delete negotiations worth it?
Pay-for-delete is a negotiation strategy in which you offer to pay your debt (partly or in full) in exchange for the collection agency to remove the derogatory item from your file. Since collection agencies want to get back as much money as possible, paying the debt may be enough incentive for them to remove the negative entry. However, pay-for-delete is not a dependable solution, and it falls in a legal gray area.
Collection agencies are required by law to report accurate information, just like reporting companies and creditors. While you can certainly request it, a collection agency has the right to refuse your request. They may agree to label the collection as paid — which is what happened — but they won’t delete the collection entry itself.
Also, note that pay-for-delete agreements might not improve your score. The most recent credit score models (FICO 9 and VantageScore 4.0) don’t factor in paid collection accounts when calculating your score, which means that fully paying the account will have the same effect as negotiating a pay-for-delete. However, bear in mind that unpaid collections will still impact your score.
Avoid the following strategies
While the following methods can be tempting options when trying to repair your credit, they can often cause more harm than good. Stay away from the following:
Closing a line of credit that is already behind on payments
Closing a card that’s behind on payments doesn’t eliminate the debt. In fact, it can lower your credit score by increasing your debt-to-credit ratio, also known as credit utilization percentage. This ratio represents the amount of credit you’re currently using divided by the total amount of credit you have available.
For example, if you have two credit cards, each with a maximum credit limit of $5,000, your total available credit is $10,000. Owing $3,000 on one card and $2,000 on the other would mean you’re using 50% of your total available credit.
To improve your credit score, experts recommend keeping your credit utilization under 30%. Following the example mentioned above, that would mean using only $3,000 or less per cycle.
If you close one of your credit cards instead of paying it, you’ll have less available credit. Creditors evaluate your debt-to-credit ratio when you apply for new cards or loans. If your ratio is over that threshold, they might classify you as a high-risk borrower, offer you less attractive interest rates or even deny you credit altogether.
Filing for bankruptcy
Bankruptcy should be considered a last resort — it can seriously damage your score and hinder your ability to get loans, mortgages or credit for years after your debts are discharged.
There are two types of bankruptcies available for individuals: Chapter 7 and Chapter 13. A third type, Chapter 11, is meant for businesses.
Under a Chapter 7 bankruptcy filing, a court mandates the liquidation of your assets in order to pay your outstanding debt. A trustee is then appointed to review your finances and sell off any additional asset that isn’t protected under bankruptcy exemptions.
With a Chapter 13 bankruptcy, on the other hand, you’re allowed to keep your assets as long as you complete a court-mandated repayment plan meant to pay your highest priority, secured debt.
Impact of bankruptcy on your credit report
Filing for bankruptcy can lower your score by around 200 points or more. It will also negatively impact your chances of getting new lines of credit or loans for several years until your credit history substantially improves.
If you file for Chapter 7 bankruptcy, the derogatory mark will remain on record for up to 10 years; for Chapter 13, it’s seven years.
Meet the Experts
’s staff of editorial writers have spent hundreds of hours conducting research, interviewing industry experts, and reviewing the products and services out there to help inform and educate our readers.