Learning you have an account in collections can be a stressful experience. But don’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:
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 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. Or, they may hire or sell your debt to another company to collect the amount due. There’s no set time frame as to when a lender will place a past-due account into collections.
If the original company is attempting to collect the debt themselves, the account information will show the phrase “In Collections.” If the creditor sold the unpaid debt to an outside, or third-party, company, that collections company will now be reporting the account to credit reporting agencies. Some accounts that don’t normally show up on your credit reports, like those for phone or utility bills, can appear in collections when an outside collections agency has bought the debt from the original creditor.
The contact information for the collections 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. 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.
Like other adverse information, collections will remain on your credit report for 7 years. A paid collection account will remain on your credit report for 7 years as well. There is a state exception for residents of New York for which paid collections fall off their credit reports after 5 years. Another exception is medical collection debt, which is detailed in the next section. 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.
You can’t remove collections from your credit report unless the account doesn’t belong to you or the account is the result of fraud. 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. The Consumer Financial Protection Bureau has sample letters you can use to help guide you if you’re asking for more information from a collector. 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.
Medical collection debt will not appear on your credit report until one year from the date of the original delinquency. This gives you and your insurance company, if you have one, time to work with your provider and come up with a payment plan if necessary. In the first half of 2023, medical collection debt under $500 will no longer appear on credit reports. Additionally, medical collection debt that has been paid in full is no longer included on your credit report.
Whether these changes to medical collection debt reporting have 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. While FICO® hasn’t made changes to their scoring models to directly address medical debt collections, recent FICO models already omitted third-party collections that are paid in full which had an original delinquency amount of under $100 in credit score calculations.
Once you learn you have an account in collections, you’ll want to work with the collection agency or the original lender. Ideally you should work to pay off the amount in collections as quickly as possible. But 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. Set 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.
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. You can learn more about the different sections of your TransUnion credit report and how information impacts your credit health by exploring our guided credit report tool.
The credit scores provided are based on the VantageScore® 3.0 model. Lenders use a variety of credit scores and are likely to use a credit score different from VantageScore® 3.0 to assess your creditworthiness.
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