COLLECTIONS

When an account becomes seriously past due, the creditor may decide to turn the account over to an internal collection department or to sell the debt to a collection agency. Once an account is sold to a collection agency, the collection account can then be reported as a separate account on your credit report. Collection accounts have a significant negative impact on your credit scores.

Collections can appear from unsecured accounts, such as credit cards and personal loans. In contrast, secured loans such as mortgages or auto loans that default would involve foreclosure and repossession, respectively. Auto loans can end up in collections also, even if they are repossessed. The amount they are sold for at auction may be less than the full amount owed, and the remaining amount can still be sent to collections.

Collections can be removed from credit reports in only two ways:

1. If the collection information is valid, you must wait 7 years from the original delinquency date for the information to cycle off your credit reports. The original delinquency date is the date the account first became delinquent and after which it was never again brought current.
2. If collection information is inaccurate, you can file a dispute on the collection information in your credit report. Depending on what the inaccuracy is, the collection account may be updated rather than removed. Learn more on how to dispute credit report information.

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