SUMMARY: Our experts explain when collection agencies report debt to credit bureaus, how collection accounts impact your credit, and how to handle collections problems.
When you have an unpaid bill that is turned over to a collection agency, it can bring down your credit score, which can have a negative effect on your ability to get a loan or even rent an apartment. Here is what you need to know about collection accounts, including when collection agencies report to credit bureaus and how that reporting affects your credit.
Do Debt Collectors Report to Credit Bureaus?
Usually, the answer is yes, most collection agencies report your collection account to the three major credit bureaus, causing the account to appear on your credit report. But keep in mind they are not required to report it. Some agencies may report the collection account right away, while others may never report it. So the question of how long before a collection agency reports to a credit bureau really is up to the collection agency.
How Do Collection Accounts Impact Your Credit?
A collection account on your credit report can bring your score down dramatically. Chances are by the time the account gets to collections, your score has already decreased because of late payments. How much a collection account brings your score down will depend on your credit score range — it will have a greater impact on a higher score than it does on an already low score. Collection accounts can remain on your credit for up to seven years, plus 180 days from the date the account became past due, so it’s important to do all you can to avoid letting a loan or credit card bill go into collections.
Some credit scoring models consider the type of account, as well as whether it has been paid or not when calculating your score. For example, a medical bill in collections may have less of an impact on your credit score than a different type of collections bill. Similarly, an account that is paid in full may be weighted less than one that is still outstanding.
What to Do If You Have A Collection Account on Your Credit Report.
If you see a collection account on your credit report, the first thing to do is determine whether or not the debt is really yours. If you don’t recognize the account, call the collection agency for more information or file a dispute.
If you determine the debt is yours, pay it off in full, or call the collection agency to arrange a payment plan or settle the debt for a lower amount. Once the debt is paid, some collection agencies may be willing to remove the account from your credit report, saving you many headaches down the road.
If you are like the many Americans who have made mistakes with their credit, it is never too late to start rebuilding your credit score and developing a credit strategy. Reach out to TDECU today to find out how we can help you achieve your financial goals.