Key Takeaways:
- Collections remain on your credit report for seven years.
- An account may go to collections when a company is attempting to collect money for accounts that are past due.
- A company may try to collect past-due payments themselves or send the unpaid debt to a debt collector to collect it.
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Learning you have an account in collections can be a stressful experience. But you shouldn’t ignore it and hope it goes away.
If you have an account in collections, it’s important to know how long it will stay on your credit report. Once you learn the basics, you can make a plan to confidently get back on track:
What are collections and how does it work?
Bills fall into collections when they’re seriously past due. It can be a sign of financial trouble. But it could also simply be a bill that slipped through the cracks.
Most of the accounts or bills you have can go to collections, including credit cards, utilities and private student loans, just to name a few. When a bill is late, a lender may try to collect money for the past-due payments themselves. There’s no set time frame as to when a lender will place a past-due account into collections.
Instead of trying to collect the debt themselves, the lender or company may hire or sell your debt to a debt collector to collect the amount due. These third-party companies are sometimes referred to as debt collectors or collections agencies.
Where collections appear on your credit report
Once your account is in collections, the original company or collection agency may begin reporting the outstanding debt to credit reporting agencies (TransUnion®, Equifax, Experian). This means the collections account may appear on your credit report.
If the original company is attempting to collect the debt themselves, the account information on your TransUnion credit report will show the phrase “In Collections.” If the creditor sells the unpaid debt to an outside, or third-party company, that collections company will now be reporting the account to credit reporting agencies.
The contact information for the collection agency, along with who they are collecting the debt for, will be listed with the rest of the account information on your credit report. When the collection has been paid, it will say “Paid Collection” in the account information on your TransUnion credit report. Credit reports don’t update immediately, but the change should be reflected in your report when the information is provided to the credit reporting agencies by the collections agency. This usually happens once a month.
How long does a collection account stay on your credit report?
Like other adverse information, collection accounts will remain on your credit report for up to seven years. A paid collection account will remain on your credit report for up to seven years as well. There is a state exception for residents of New York for which paid collections fall off their credit reports after five years. Another exception is medical collection debt, which is detailed in a section below. You can see when the collection is estimated to be removed in the information section of the account. The negative effect of collections and missed payments on your credit score tends to lessen over time.
Pro Tip:
Even if you paid off a collections account, it will appear on your credit report for up to seven years. An exception is medical debt, which is removed from your credit report when paid in full.
How long do closed accounts stay on your credit report?
Accounts in good standing have a history of on-time payments and show responsible credit habits. Typically, accounts that are closed in good standing will stay on your credit report for up to 10 years. Accounts closed with adverse information, like accounts with reported late payments and collections accounts, are generally removed from your credit report after seven years. If a third-party debt collector is attempting to collect the debt, you may see a new account in the collections section of your TransUnion credit report.
| Information Type | How Long the Information Stays on Your Report? |
|---|---|
| Accounts closed in good standing | 10 years |
| Missed payments | 7 years |
| Collections | 7 years |
| Bankruptcies | Chapter 7: 10 years Chapter 11: 10 years Chapter 12: 10 years Chapter 13: 7 years |
Medical debt collections on your credit report
- Medical collection debt with an initial reported balance under $500 and paid medical collection debt does not appear on credit reports.
- Unpaid medical collection debt will not appear on your credit report until one year from the date of the original delinquency.
- Some states have additional laws regarding medical debt.
Whether medical debt in collections has an impact on your credit score, and by how much, depends on your credit history and the credit scoring model used. VantageScore® credit scoring models no longer include unpaid medical collections when calculating credit scores. There are different credit scoring models. How each model treats medical debt collections can vary.
How collections impact your credit score
If you have an account in collections, you’ve likely missed several payments on the account. For the VantageScore® 3.0 model, your payment history is an important credit score factor. Late payments can have a significant negative impact on your credit score. Similarly, when a collections account appears on your credit report, it can further impact your credit score. There are different credit scoring models that may weigh factors differently, but generally, your payment history is one of the most influential credit score factors.
Adverse information, like missed payments and collections accounts, will eventually be removed from your credit report. Collections accounts, both paid and unpaid, can remain on your credit report for up to seven years. However, if you concentrate on making your payments on time and paying down your debt, among other positive credit moves, you can expect to see your credit score improve over time.
Managing and preventing collection accounts
Medical bills and utilities are two common types of accounts that can end up in collections. One medical procedure can result in multiple bills from different providers. If you miss one bill, it may fall into collections, even if other related bills have been paid. A trip to the hospital can be stressful, and the bills that follow may seem confusing. Make sure to do your best to keep track of all medical bills and talk to your care provider or hospital network if you have questions. There are also steps you can take if you think you will have trouble paying for medical bills.
If you move, your previous utility companies may not have your current address. Your account may be sent to collections if you do not pay the final bill for your previous address. As you prepare to move, make sure you provide your new address to all banks, lenders and utility providers so you don’t miss an important bill.
What you can do after an account is in collections
Once you learn you have an account in collections, you can work with the collection agency or the original lender. Your exact next step depends on your individual situation. The Consumer Financial Protection Bureau provides guidance on negotiating with debt collectors.
After you know where you stand with any collections accounts, you can build a plan to manage your debt and help prevent missed payments in the future.
- Consider setting up automatic payments, if possible, to help you keep up with bill due dates, especially those that are easy to forget.
- You may also want to set aside a specific day each month to pay bills and go over your accounts to be sure you don’t see anything unexpected.
- While going over accounts, check that the contact information you have listed for each of your credit accounts is up to date so you don’t miss any important letters or phone calls.
You can’t remove collections from your credit report unless the account doesn’t belong to you, the account is the result of fraud or if the account is inaccurate, incomplete or unverifiable. If you see a collection account on your report you don’t recognize, you can contact the collection agency using the phone number listed on your credit report. They can confirm if the debt belongs to you and provide other relevant information about the account.
If you suspect a collection account on your TransUnion credit report is fraudulent, you should report the fraud at identitytheft.gov and dispute it through the TransUnion Service Center. You can also dispute your TransUnion credit report by mail or phone.
Recover from collections with good habits
Having an account sent to collections can certainly be a setback for your credit health, but they don’t stay on your report forever. With a plan, consistent healthy credit habits and time, you can navigate through collections to achieve healthier credit and reach the financial opportunities you deserve.
To build confidence as you manage your credit, it’s important to monitor your credit report. You can get your credit report for free each week from each of the three nationwide credit bureaus at annualcreditreport.com.
