Can a Collection Agency Report to My Credit Report Even When Paid?
- Credit reports are compiled by three companies called TransUnion, Experian and Equifax to provide lenders and insurers with a summary of a consumer's demographic and financial information. The Federal Reserve Bank of San Francisco explains that these companies contain data on current past accounts, including old delinquencies and charge-offs that were turned over to collection agencies. These unpaid bills are visible to whoever views the credit file, and they figure into credit and insurance application decisions.
- Collection agencies report accounts to all of the credit bureaus. The amount shows as outstanding until it is paid in full or settled for a negotiated amount. Usually agencies report such accounts as "paid" or "settled." They still hurt the consumer's credit rating because anyone who pulls report copies knows there was a collection account.
- Paid collection accounts stay on credit reports for seven years, according to the FICO credit score company. Their effects lessen over time, but they are still a negative mark for as long as they are visible and can result in problems getting credit and insurance or higher interest rates.
- Consumers can often prevent continued reporting of a paid collection by bargaining. Offer a lump sum payoff in return for a credit file change, the Credit Builders Alliance financial information website advises. Agencies often accept less than the amount owed. They purchase debt at a discount, so even a partial payment is profitable. Debt Steps recommends insisting on total removal of the collection account and asking the agency to request removal or a positive status on the original bill. Lenders charge off debts before selling them to debt collectors, and the original entry continues to hurt the consumer's credit reports. Get agreements in writing before sending money.
- A paid collection account can sometimes be wiped off credit reports earlier than seven years. Collection agencies do not always keep accurate records or check data before they report it. The item is disputable if they make any mistake in the information provided to the credit bureaus. The bureaus all have dispute instructions on their websites and are obligated to investigate, according to the FTC. If the collection agency does not have documentation or does not respond at all, the account is removed.