Content of the material
- How Long Does a Collection Account Stay on a Credit Report?
- What You Need to Know About Debt Collections
- Getting a “Satisfied In Full” Reporting
- At a glance: How credit scores factor in collection accounts
- 3. Ask the Collection Agency to Validate the Debt
- If There Is Inaccurate Information on Your Credit Report
- Hire a Credit Repair Organization
- Wait for Accounts to Drop Off
- 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
- 1. Do Your Research & Check All Credit Reports
- How long can a debt collector pursue an old debt?
- Frequently Asked Questions
- What is a collection on your credit reports?
- Can you remove a collection from your credit reports without paying?
- How Do Collections Affect Credit?
- What if the Information Listed on Your Credit Report Is Wrong?
- 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
- The bottom line
- Learn more:
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.
What You Need to Know About Debt Collections
Debt collections come in many forms. Whether it’s an unpaid medical bill, a cell phone bill, or even an $18 library book you never returned, unpaid debt can lead to negative information on your credit report.
It looks especially bad when the negative item comes from a collection agency. Collections accounts tell other creditors you let an old debt go three or maybe even six months without paying.
When you apply for new credit, lenders know your old lenders lost money on your accounts. So a collection account will have a negative impact on your ability to apply for new credit — whether it’s a mortgage, a major credit card, or a personal loan.
Getting a “Satisfied In Full” Reporting
If the collection agency agrees to settle for less than you owe, be sure it also agrees to report the debt it holds as “satisfied in full” to the credit bureaus. Get written confirmation from the creditor and the collector. The debt collector’s confirmation should say that it will acknowledge the debt as paid in full when you pay the agreed amount.
If the creditor, or the debt collector if it has the authority, agrees to delete the original account line, get confirmation that it will submit a Universal Data Form to the three major credit reporting agencies deleting the account/tradeline. If the debt collector doesn’t have the authority to act for the original creditor to delete the account information on the original debt, you might need to contact the creditor and the debt collector separately.
At a glance: How credit scores factor in collection accounts
|VantageScore 4.0||FICO Score 8||FICO Score 9|
|Ignores paid collection accounts|| |
Ignores medical collection accounts that are less than six months old
Weighs unpaid medical collection accounts less heavily than other types of collection accounts
Ignores small-dollar “nuisance” accounts that had an original balance of less than $100
Treats medical collection accounts, including those with a zero balance, like other collection accounts
Ignores paid collection accounts
Weighs unpaid medical collections less heavily than other types of collection accounts
3. Ask the Collection Agency to Validate the Debt
If you can’t find inaccuracies on your credit reports, write to the collection agency and ask it to validate your debt.
Under section 809 of The Fair Debt Collection Practices Act, collection agencies are required to validate debts they are attempting to collect, if you request that they do so.
The main issue here is that you have only 30 days to make the request after the collection agency first contacts you.
If they are unable to validate the debt, you can ask them to remove it from your credit report.
If There Is Inaccurate Information on Your Credit Report
If you are hoping to delete a paid-off collections account from your credit history so that you can immediately boost your credit score, there are other ways to go about achieving that aim. While raising your score to any significant degree takes time, patience, avoiding late payments, and a dedication to good debt management habits, working with a credit repair organization can help you boost your score quickly. This is a good approach to consider if you’re trying to raise your score by a small amount to secure better terms for a major upcoming purchase and there is inaccurate information reported on your credit history.
Hire a Credit Repair Organization
Although credit repair organizations ultimately can’t do anything that you can’t do yourself for free, working with them can be helpful if you are uninterested in making credit dispute efforts on your own. Beware of any type of credit service company that guarantees you that they can raise your credit by at least a certain amount or make negative information that is accurate disappear. It is illegal to remove legitimate negative information from your credit report, regardless of who actually does it. These firms are ultimately governed by the Credit Repair Organization Act (CROA). This means that any credit repair firm that promises to help you must adhere to the following requirements:
They must advise you of your rights in a written contract that clearly outlines the details of the services that they will perform
They must give you a 3-day right of rescission that you will have in writing, where you can cancel within the first 3 days without any fees being assessed
They must tell you in writing how long their services will take
They must tell you upfront exactly what they will charge for their services
They must disclose any guarantees that they make in writing before you sign any contract
If the credit repair company that you hire does not furnish you with this information before beginning to work on your credit, then you have several recourses of action that you can take. The first step is to file complaints with the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB). The FTC has the enforcement power in this case, so file your complaint with them first. Then you’ll need to file a complaint with your state’s attorney general (AG). If all else fails, you can sue your credit repair company in federal court.
Wait for Accounts to Drop Off
If you choose not to take steps to remove closed accounts, you’ll be happy to hear that these closed accounts won’t stay on your credit report forever. Depending on the age and status of the account, it may be nearing the credit-reporting time limit for when it will drop off your credit report for good. If that’s the case, all you might have to do is wait a few months for the account to fall off your credit report, and then for your credit report to update.
Most negative information can only be listed on your credit report for seven years from the first date of delinquency.
If the closed account includes negative information that's older than seven years, you can use the credit report dispute process to remove the account from your credit report.
No law requires credit bureaus to remove a closed account that's accurately reported and verifiable and doesn't contain any old, negative information. Instead, the account will likely remain on your credit report for ten years or whatever time period the credit bureau has set for reporting closed accounts. Don't worry—these types of accounts typically don't hurt your credit score as long as they have a zero balance.
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.
1. Do Your Research & Check All Credit Reports
To get details on your collection account, review all of your credit reports. You can do this by visiting AnnualCreditReport.com. Normally, you can only get one free copy of each report annually. However, due to the Covid-19 pandemic, you can check your reports from all three credit bureaus for free weekly until April 20, 2022.
Your credit report should list whether the collection is paid or unpaid, the balance you owe (if any) and the date of the account’s delinquency. If you don’t know who the original creditor is and it’s not listed on your report, ask the collection agency to give you that information.
Afterward, compare the collection details listed on the credit report against your own records for the reported account. If you haven’t kept any records, log into the account listed to view your payment history with the original creditor.
How long can a debt collector pursue an old debt?
Each state has a statute of limitations about how long a debt collector can pursue old debt. For most states, this ranges between four and six years. These statutes govern the amount of time that a debt collector can sue you, but there is no limit to how long a collector has to try and collect on a debt. If you are being contacted about a debt that you believe is not yours or is outside the statute of limitations, do not claim the debt; instead, ask the company to validate that the debt is yours.
Frequently Asked Questions
What is a collection on your credit reports?
A collection account is created when a debt you’ve failed to repay is transferred to a collection agency. You’re still on the hook for paying the debt once it’s sold, but you typically have to pay the collection agency instead of the original creditor.
Debts aren’t usually turned over to collections the moment you make a late payment, but the time between your first missed payment and the transfer can vary. It may take several months, it may happen immediately, or it may never happen at all, depending on the creditor.
Once the debt has been turned over to collections, it’s generally reported to the credit bureaus. It’ll then appear on your credit reports and, as a result, damage your credit scores until it’s removed.
Can you remove a collection from your credit reports without paying?
Technically, the answer is yes. It’s unlikely, though.
There are a few ways you could try. They’re essentially the same steps you’d take to request a paid account be removed:
- File a dispute with the credit bureau and/or ask the collection agency to validate the debt if you believe the collection account is inaccurate.
- If the account is legitimate but you’ve paid some of it and/or have exhibited responsible behavior otherwise, send the collection agency a goodwill letter requesting the unpaid collection be removed from your reports.
If the above routes fail, you’re probably out of luck. And remember that even if a collection account is removed from your credit reports, you’re still liable for the debt.
How Do Collections Affect Credit?
Creditors view collection accounts as red flags, but likely view paid collections with less disfavor than unpaid ones. The most recent version of the FICO® Score☉ (FICO 9) and versions 3.0 and 4.0 of the VantageScore® credit scoring systems agree: Unpaid collections can hurt your credit score, but paid ones do not.
Some lenders use older versions of both credit scoring systems that still count paid collection accounts, however, and there’s no way to know ahead of time which credit scoring method(s) a lender will use when deciding to approve a loan application. So while paid collections on your credit report may still hurt your chances of approval, paying off the account gives an opportunity to do the least possible damage.
What if the Information Listed on Your Credit Report Is Wrong?
It is important to immediately dispute any debt that is not being reported accurately on your credit report(s). Each credit bureau receives information from creditors, although not all creditors report to each bureau. It’s important to pull a free credit report from each of the credit bureaus on an annual basis for review, if not more frequently than that.
If an item shows up on your report as not being paid or the amount of the debt reported is larger than the actual debt (or any other kind of inaccurate information is listed on your credit history), don’t hesitate to write a dispute letter to all three of the major credit reporting agencies (Experian, Transunion, and Equifax) as well as VantageScore and dispute the inaccurate information. The Fair Credit Reporting Act (FCRA) legally requires these companies to remove any item in question until it has been either verified or corrected. Make sure you only contest inaccurate information, though; trying to dispute accurate information will only hurt you in the long run.
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.
The bottom line
While old debts should be discharged from your credit report after they’ve reached their legal expiration, this doesn’t always happen automatically. It’s important to be vigilant and aware of the information that is on your credit report. If it has any errors or misinformation, you’ll want to fix that as soon as possible. Removing even a single old collection account or old debt on your credit report can raise your credit score by 50 points or more — so take action as soon as you notice an error.
- How long can a debt collector pursue old debt?
- What you need to know about resetting old debt
- When does debt fall off your credit report?