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How Collection Accounts Hurt Your Credit Score


  • A debt can be sold to a collection agency if you miss several payments on an account.
  • A collection account stays on your credit report for approximately seven years.
  • Collection accounts decrease your score, but the impact lessens after two years.

Seeing a collection account on your credit report is not a good feeling. Unfortunately, it will stay on your credit report for around seven years. But understanding how this happened can help prevent it from happening again.

What Are Collections?

A collection account, sometimes referred to as a charge-off, can occur if you miss payments or ignore a debt you owe.

If you neglect to pay a bill, whether it’s your credit card, medical bill or utility bill, it can end up going to a collection agency. With a credit card balance, the lender usually waits until your payment is overdue by at least six months.

When the creditor decides there’s little chance of collecting the money you owe, your account could be sold to a collection agency. The agency then likely reports your delinquent account to the credit bureaus.

How Long Do Collections Stay on Your Credit Report? 

If a collection account is on your credit report, it will remain there for around seven years after your account first became delinquent. The original date is the first day you missed a payment, which would be 30 days past due.

Once the negative item hits your credit report, it usually can’t be removed if it’s accurate. If the information isn’t accurate, then file a dispute with each of the credit bureaus that has your delinquent account listed.

If you do pay off the account, but the collector doesn’t notify the bureaus, you can file a dispute about that, too.

How a Collection Account Hurts Your Credit Score

If the agency reports your delinquent account to the bureaus, it will appear as a negative item on your credit reports. In addition to this item, you might also have a late payment on your report dating back to the account with your original creditor. When you missed a payment, your lender at the time may have reported it to the bureaus.

I know this is frustrating, but there’s a bright spot in all this. After the first two years, the impact of negative items on your credit report starts to decrease, and your score begins to improve. In the meantime, work on developing excellent credit habits, such as paying bills on time and maintaining low balances on credit cards.

When Will Credit Bureaus Remove Medical Collections?

There is some good news when it comes to delinquent medical debt that’s listed on your credit reports. According to the Consumer Financial Protection Bureau, about two-thirds of medical collections will no longer be reported. Medical collections that are less than $500 won’t appear on your reports starting in 2023.

Additionally, paid medical debt that went to collections won’t be included in your credit report. Medical care is expensive, and many have problems paying it off. So it’s great to know it doesn’t have to stay on your report for seven years.

The new rules also give you more time to pay off your medical debt. Your unpaid medical debt used to be eligible for collection after six months. Starting this year, you’ll have 12 months to pay it off before it’s eligible for collections.

For some, their medical debt got sent to a collection agency while they were waiting on their insurance companies to pay their part. This new rule gives everyone some breathing room while they figure out what their out-of-pocket expenses are.



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