FAQs About Debts in Collections

Making ends meet can be a struggle. If you fall behind on even one bill, you have to worry about taking a hit to your credit score. If your finances don’t recover quickly enough, a delinquent bill may end up in collections. So how long do you have before the collection agency reports to the credit bureaus and does even more damage to your credit score?

The short answer is you have no grace period before a collection agency can report to a credit bureau. Once your delinquent account is sent to collections by the original creditor, there is little you can do to stop the account from being listed in the public records and collection section of your credit report. Even if you pay the debt in full once it’s in collections, the fact that the debt had to go to collections before it was paid will remain a negative factor affecting your credit score for years.

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Do Collection Agencies Report as a Separate Account on Your Credit?

That bill that you didn’t pay has multiple lives on your credit report. When you open an account, it gets listed by the company extending the credit as a trade line on your credit report with one or all of the major credit bureaus: Experian, TransUnion and Equifax. If you fail to pay and the creditor transfers the debt to a collection agency, the debt gets listed again on another trade line in the collections section of the report. The collection agency uses this new account line to report activity on the debt.

The original creditor typically closes out the original trade line by indicating the debt was charged off, or written off as a bad debt that the creditor can’t collect. If the original creditor sells your debt to a debt buyer or if your debt is transferred to a different collection agency, a new trade line gets generated.

When Do Collection Agencies Report to Credit Bureaus?

Everything regarding credit reporting and collection activity falls under federal law. By law, your original creditor can’t report a late payment to the credit bureaus until it’s 31 days past due, so you have a built-in 30-day grace period to make your payment before your credit score is affected. But once the account is transferred to a collection agency, it’s already delinquent, and there’s no rule that says the collection agency has to wait to report.

How Long Do Collection Agencies Have to Report to Credit Bureaus?

A collection agency can report your delinquent debt to credit bureaus immediately upon receiving your account from the original creditor. There is no grace period before a collection account becomes eligible for reporting. The agency can continue to report to credit bureaus about your delinquent debt for seven years plus 180 days from the point the account was placed in collections.

How Long Does it Take for a Company to Send You to Collections?

Under federal law, an original creditor can send your account to a collection agency once it’s 31 days past due. At that point, practices vary. Some creditors may continue to try to collect the debt for up to 180 days using in-house people before sending the account to a collection agency. Other creditors may send your account to collections as soon as it is eligible.

Can a Collection Agency Report to the Credit Bureaus if You Are Making Payments?

Yes, a collection agency can report to the credit bureaus even if you are making payments. Once your debt is transferred from the original creditor to the collection agency, the debt gets a new trade line on your credit report that’s under the control of the collection agency. Payments made are reflected through this new entry.

Do Disputed Debts in Collections Get Reported?

That medical billwas supposed to be paid by your insurance company—but it wasn’t. And you didn’t find out that you owed money until the bill had been transferred to collections. How long do you have to dispute a bill before a collection agency reports to the credit bureaus? Is there a rule or practice that prevents collection agencies from ruining your credit in cases of disputes regarding unusual bills that you were unaware you owed?

Under the FCRA, you have 30 days to dispute a debt once you’re contacted by a collection agency. Until the collection agency provides proof that the debt is valid, it’s not allowed to conduct any debt-collection activity. Unfortunately, reporting the collection account to the credit bureaus is not considered collection activity, so even if you dispute the debt, the agency has likely already reported it to the credit bureaus. If you win the dispute, you can then petition for the information to be removed from your report.

Can Collection Agencies Remove a Collection From a Credit Report?

There is no easy way to get a collection account removed from your credit report, even if you dispute the debt. If the collection information is inaccurate and you weren’t able to convince the collection agency that you don’t owe the debt, your only option is to ask the credit bureau to remove the collection account. Credit agencies tend to prefer to update the account rather than remove it.

Valid collection accounts stay on your credit report for seven years, beginning 180 days after the account is charged off or placed in collections. The only way to get a collection account removed from your credit report before this is to negotiate a settlement with the collection agency to pay off the debt in exchange for the agency removing the account information. Get the agreement in writing so you can pursue legal remedies if the collection agency doesn’t live up to its end of the bargain.

What Incentive Is there for Paying Off An Account in Collections?

The bottom line is if you don’t pay your delinquent bill before it gets transferred to collections, you should resign yourself to a prolonged period of rebuilding your credit. Whether you pay the bill immediately or make payments over time, the account stays in the collection section of your credit report, pulling your credit score down.

And if you make payments, the collection stays on your credit report for seven years from the date of the last activity on the account, which becomes the date of your last payment. Technically, you’re penalized if you pay a collection account over time because paying extends the seven-year time period before the information falls off your credit report. Keeping your other credit accounts in good standing may do more to raise your credit score back up than using limited funds to pay off old collections.

Can a Collection Agency Ruin My Credit?

Yes, having a debt sent to a collection agency will have a negative impact on your credit score. However, if you keep your other credit accounts in good standing, they can help offset some of that negative impact over time.

Credit.com can help you identify strategies to rebuild your credit. Use the site to pull two free credit reports to keep track of your credit accounts and dispute inaccurate information.