How long before a collection agency reports to credit bureau

Your credit scores determine everything from the interest rate you pay on credit cards and loans to whether or not you qualify for rental housing. Once your debt has been sent from a creditor to a collection agency, chances are your credit rating has already been affected by the creditor's report. However, you can take measures to reduce the impact of additional hits to your credit score from your interactions with the collection agency.

Time Frame for Disputing a Debt

The Fair Debt Collection Practices Act provides you with 30 days to dispute a debt in writing and request an investigation after a collection agency's initial contact with you. Until the collection agency provides you with proof that the debt is legitimate, it may not conduct any further collection activity. Consumers often mistakenly believe that the prohibition on collection activity includes reporting the debt to the credit bureaus – thus giving them 30 days in which to pay the debt and prevent credit damage. Unfortunately, this is not the case.

According to the Federal Trade Commission, credit reporting does not constitute “collection activity.” Because a collection agency can opt to report your debt at any time after purchasing the account, it is imperative that you act quickly to pay your debt and avoid further credit consequences.

Post-Payment Reporting

After you pay a collection agency that has already reported your delinquent account to the credit bureaus, the company updates the report to reflect the fact that your debt is no longer outstanding. If you pay the debt before the collector reports it, that does not guarantee that the company will not report the account after you pay it off. A paid collection is just as detrimental to your credit scores as an unpaid collection. Before you submit your payment, ask that the collection agency send you a statement, in writing, agreeing not to report your debt to credit bureaus after you pay it off.

Settling the Amount

Collection agencies sometimes offer debtors debt settlement agreements by which the debtor can pay less than he owes to satisfy the debt. Rather than write off the unpaid balance, however, the collection agency may sell it to another debt collector. You don't want to fight this battle a second time.

Thus, if you can afford it, paying off the debt in full is the safest course of action to prevent future credit problems. If settling the debt is your only option, ask that the company provide you with a receipt noting that your account was “settled in full” and will not be sold to another collector.

Credit Score Considerations

It isn't always possible to catch a collection account before the collection agency reports it to the credit bureaus. Although all collection accounts are inherently negative, paid debt still looks better to lenders who review your report than unpaid debt. Collection accounts can remain on your credit report for seven years.

Fortunately, the older an item is, the less impact it has on your overall score. Provided you manage your debts responsibly in the future, your credit scores will continue to recover until the credit bureaus eventually delete the collection from your report.

Editorial Note: Credit Karma receives compensation from third-party advertisers, but that doesn’t affect our editors’ opinions. Our third-party advertisers don’t review, approve or endorse our editorial content. It’s accurate to the best of our knowledge when posted.

If you’ve neglected to pay off a medical or credit card bill, a collection account may appear on your credit reports.

This typically happens when the original company owed writes off your debt as a loss and sells it to a debt collection agency. Generally speaking, companies only sell your debts after you become severely delinquent on a payment. This is known as a “charge off,” and it typically happens after 90 to 180 days of nonpayment.

If a collection account appears on your credit reports, the last thing you should do is ignore it. Collections can have a significant negative impact on your credit, so it’s important to know how to handle them.

• How long do collections stay on your credit reports?
• At a glance: How credit scores factor in collection accounts
• Will making payments change the timeline or keep a collection from falling off your credit reports?
• Collection agencies don’t always play by the rules

The short answer: Accounts in collection generally remain on your credit reports for seven years, plus 180 days from whenever the account first became past due.

The long answer: Once the original creditor determines your debt is delinquent and sells it to a collection agency, the collection account can be reported as a separate account on your credit reports.

Assuming the collection information is accurate, the collection account can stay on your reports for up to seven years plus 180 days from the date the account first became past due.

Confused? Let’s look at an example:

• Your account becomes late on Jan. 1, 2018.
• After 180 days of nonpayment, your creditor charges it off on June 30, 2018.
• The original delinquency date is Jan. 1, 2018, but the account appeared on your credit report(s) 180 days after that date. So the account should fall off your credit report(s) by June 30, 2025.

Do different types of debts, like medical collections, get treated differently?

Debts that enter into collections are generally treated the same and play by the same rules. In most cases, they’ll all take up to seven years to fall off your credit reports.

However, medical collections do have a few quirks in terms of how they’re reported. As part of the National Consumer Assistance Plan, medical debts won’t be reported until after a 180-day waiting period to allow insurance payments to be applied. The credit reporting agencies must also remove previously reported medical collections that have been or are being paid by insurance.

Medical collections may also impact your credit scores differently than other types of collection accounts, depending on the credit scoring model. That’s because newer credit scoring models such as VantageScore 4.0 and FICO® Score 9 de-emphasize the impact of unpaid medical collection accounts on consumer credit scores.

At a glance: How credit scores factor in collection accounts

Will making payments change the timeline or keep a collection from falling off your credit reports?

In general, making payments on (or fully paying off) a debt in collection should not affect the time it stays on your credit reports.

As the Consumer Financial Protection Bureau notes, however, in some states a partial payment can restart the time period for how long the negative information appears on your credit reports.

A partial payment can also restart the statute of limitations, or period of legal liability, for the debt. If the debt is still within the statute of limitations, a debt collection agency may choose to sue you for your unpaid debt. Each state has its own statute of limitations that determines how much time a debt collection agency has to take legal action, but for many states it ranges from three to six years.

If you do pay off an account in collections, the collection agency may be able to contact the credit bureaus and remove the collection account from your credit reports before the seven-year mark.

You may have to do some extra pushing to make this happen.

Before paying off an account in collection, get on the phone with an agent from the debt collection agency and confirm that the agency will update your credit reports. If the agent can’t or won’t agree to remove the paid account from your credit reports, ask if the account can be updated as “paid as agreed upon” once your payment/s are received.

This may prove more difficult if you choose to settle your debt rather than pay off the full amount originally agreed upon. In other words, there’s a chance the collection agency may refuse to remove it because the debt was not fully paid. So when negotiating with a debt collector, it’s important to get everything in writing before making a payment.

Collection agencies don’t always play by the rules

Collection agencies can sometimes be pushy, and some may even violate the Fair Debt Collection Practices Act, which prohibits debt collectors from using abusive or deceptive practices in an attempt to collect from you.

If you suspect you’re being harassed or treated unfairly, it’s important to know your legal rights. We recommend consulting with a legal professional as a matter of course, but you can start by checking out our guide to your debt collection rights.

Can you dispute a collection with the credit bureaus?

You can absolutely dispute a collection if you think it’s erroneous. Formal disputes must be filed individually with each credit bureau and can usually be done online through each credit bureau’s website. You should also dispute the information with the company that provided the information.

Credit Karma’s Direct Dispute™ feature can help you dispute errors on your TransUnion® credit report. We can also help you file a dispute with Equifax directly if you see an error on your Equifax® credit report.

Bottom line

Nobody wants an account in collection, but sometimes we make mistakes or simply don’t have the resources to pay off a bill.

Rather than stress out or search for the nearest hole to crawl into, take a deep breath and understand that accounts in collection won’t plague your credit reports forever. They’ll generally fall off your reports after seven years, and you may even have options for getting them removed before then.

It’s also important to know that you can take action against unfair practices by debt collectors.

“Turn to a nonprofit credit counseling agency” if you’re struggling with accounts in collection, advises Todd Christensen, education manager at Debt Reduction Services. We’d add that you shouldn’t hesitate to reach out to a legal professional if you need help navigating the murky waters of collections.

About the author: Brian Spychalski is a former Credit Karma freelance contributor now based in San Francisco. He has a background in corporate finance and a deep knowledge of the consumer credit market. When he’s not working, Brian can… Read more.

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