How long do collections stay on your credit report?
Collection accounts can remain on your credit report for up to 7 years. Even if you pay it in full it’s still considered a negative account and will remain on your file as a “paid collection” for 7 years. A collection account is also separate from the original creditor’s charge off account that will more than likely also show up on your credit report.
How do collections affect your credit?
Most accounts end up in collections after 4 to 6 months without payment. During this time, your creditors may have stopped contacting you about the debt. With many people, renewed collection activity comes as a nasty surprise after their debts are turned over to third-party collection agencies that use more aggressive tactics.
When collections first show up on your credit report, you can expect your credit scores to drop anywhere from 50 to 100 points depending on how high your credit was to start. In general, the better your credit, the worse the hit will be. Over time, the collection account will affect your credit less and less.
If I pay off a collection will it help my credit score?
FICO has updated their credit scoring to ignore paid collection accounts. They’ve also updated it so that medical collection accounts carry less weight. VantageScore has also recently updated their algorithm to ignore paid collection accounts of all types.
In the past, paid collections were treated the same way as unpaid collections. However, with the new updates to the credit scoring models, paying off a collection does now help your credit score. It’s still important to be careful before you decide to pay off a collection that it’s still something that you owe. Debt buyers will try to collect on debts that you don’t legally owe anymore.
What is a debt buyer?
Often referred to as “junk debt buyers”, debt buyers like Midland Funding LLC are debt collection agencies that go after very old debts, which they’ve purchased for as little as a few pennies on the dollar. Then, they report the collections on your credit report to try to get you to pay them. Sometimes they buy debts that you’ve already paid.
It’s not uncommon for a third party collection agency to buy and sell the same debts multiple times, which means you could have multiple collections accounts listed for the same debt, each one lowering your credit score even further.
Finding out which of these companies actually owns your debt at any given time can be tricky, and even then, you’ll still have to negotiate with the other agencies that have posted negative information to your credit file.
There are two distinct dates that you need to be aware of when it comes to collections accounts: the reporting limit and the statute of limitations. Although they sound similar, these two terms are very different.
The reporting limit on your debts is set by the Fair Credit Reporting Act (FCRA) and is equal to seven years after the date of last activity, or DLA. For collections accounts, this is typically seven years after the date that the account was charged off.
Because most accounts are charged off after six months of missed payments, you can expect to see the collections fall off of your report 7 years and 6 months after your last payment.
The statute of limitations on a debt varies from state to state. It can be as few as 3 years or as many as 6 (or longer for some types of debt).
When the statute of limitations has passed on a debt, it is referred to as “time-barred” and while a debt collector can continue to contact you about it unless you tell them to stop, they cannot legally sue you to obtain a judgment once the statute of limitations has passed. The debt may still be listed in your credit file after the statute of limitations has passed, if the reporting limit has not.
Some underhanded debt collectors attempt to coerce you into paying by listing a more recent date on the collections account. This is known as re-aging and is illegal under the FDCPA and the Fair Credit Reporting Act (FCRA).
If you try to set up a payment plan, you could open yourself up to a lawsuit by re-starting the time creditors have to legally collect. You may not be paying the creditor who currently owns the debt, so the collections will remain on your account as an unpaid collection.
Do medical bills affect credit?
Many patients don’t realize that even if they are making payments on their medical bills, they can still be sent to collections. In fact, medical bills can show up in collections before you even get your bill. Medical collections have the same affect on your credit score that any other collection does. Once a medical debt is reporting on your credit report, it is harming your credit scores.
Doctor’s offices and hospitals don’t report payment history to the credit bureaus like banks do with credit cards. With credit cards, if you make your payments on time, the banks will reflect that as positive payment history and it will have a positive affect on your credit scores. However, medical bills are not the same. If you see a medical bill on your credit report, I can assure you that it’s hurting your credit scores, whether you are making regular payments or not. The amount of the debt doesn’t matter either. A $50 medical collection will hurt your credit score just as much as a $5,000 medical collection.
Can medical bills be removed from my credit report?
Yes. Just like anything else on your credit report, medical collections can be removed.
How can I remove collections from my credit report?
Here is an example of collections being deleted from a credit report:
Removing collections from your credit report can raise your credit scores dramatically. Keep reading to see how you can get similar results.
It’s often the case that there are errors on collections accounts. Because they get passed back and forth so often, it is not uncommon for records to be mixed up. Your collections accounts may not have the right amount, the right date, or any number of mistakes that creditors don’t bother to fix.
Debt collection agencies don’t care about what they do to your credit. They only care about what it takes to get you to pay up, and they are hoping that you don’t realize that the law is on your side!
It is your legal right to dispute any mistakes on your credit report and that includes collections accounts with false information or even any accounts that you deem “questionable”.
This is where hiring a credit repair company can really make a difference. They help most people to remove these collections by disputing the errors for you, which means you don’t have to directly contact any of the debt collection companies yourself.
It also means that they handle all of the tracking necessary to ensure that these companies are complying with the FCRA and that your credit file does not contain errors like account re-aging and multiple listings for the same collections.
If you aren’t sure where to start when it comes with disputing collections on your credit report, talk to one of our credit repair experts to get your questions answered. We offer a no-obligation consultation to explain just how we remove collections and what we can do to help in your specific situation. Get in touch with us today and stop going in circles with creditors over your collections accounts.
Are collections hurting your credit score?
Lexington Law removed over 7.5 million collection items in 2015 alone. If you’re sick of going through life with bad credit, give them a shot.