In this article:
- How Long Do Collections Stay on Your Credit Report?
- Legal Grounds for Removing Collections From Your Credit Report
- How to Have Inaccurate Collections Removed From Your Credit Report
- Do I Need to Notify the Credit Bureaus of Paid Collections?
- How Do Collections Affect Credit?
- How to Improve Your Credit When You Have Collections
- How to Avoid Future Collections
Even if you pay a collection account in full, it stays on your credit report for seven years from the date you first missed a payment. Paid collection accounts have less negative impact on your credit scores than unpaid ones, so paying off accounts in collections is generally a good idea. Doing so won't immediately wipe the collection account from your credit report, but the account will show as paid when your credit report is updated—typically within 30 days of you making the payment.
How Long Do Collections Stay on Your Credit Report?
Whether you pay them or not, collection accounts are removed from your credit report seven years from the date your debt first became delinquent to the original creditor. Generally, creditors report your missed payment to credit bureaus after one billing cycle (usually 30 days) goes by without a payment.
If your bill remains unpaid, the creditor may sell your debt to a collection agency—typically after 120 days without payment. If that collection agency can't collect either, they may resell your debt to another agency. Eventually, there could be several different collection accounts on your credit report, all stemming from the same unpaid debt. Here's how that might look in practice.
Example:
- May 1: Your personal loan payment is 31 days late; your account is now delinquent.
- September 2: The lender charges off your account, reducing the balance to $0, and sells the debt to Collection Agency A. A new collection account shows up on your credit report.
- January 4: Collection Agency A still hasn't collected payment and resells your debt to Collection Agency B.
There are now two collection accounts on your credit report. Fortunately, you don't have to wait seven years from September 2 for the first account to drop off and seven years from January 4 for the second one to be removed. Since both collection accounts originated with the same unpaid debt, both will come off your credit report seven years from May 1—the date the debt originally became delinquent and was never brought current.
Learn more: When Does Debt Become Delinquent?
Legal Grounds for Removing Collections From Your Credit Report
Collections can sometimes be removed from your credit report early if there are legal reasons for doing so, such as inaccuracies or identity theft.
Reporting Errors
If your account is mistakenly reported as being in collections, or there are other errors such as inaccurate balances, you have the right to dispute it with the credit bureau that is reporting the information.
Identity Theft
A collection account you don't recognize may appear on your credit report if you've been a victim of identity theft. A criminal may have used your identity to open an account or get a loan and failed to make payments. In this case, you can submit a dispute with the credit reporting agency to have the collection account removed.
Mixed Credit Files
Mixed credit files occur when two people's credit reports are unintentionally commingled. This might happen when two family members have similar names, such as a father and son who are Jr. and Sr. It can even happen to unrelated individuals who have similar names, birth dates or Social Security numbers. If you find someone else's credit information in your credit report, you can dispute it with the appropriate credit bureau to have it corrected.
Outdated Debt
The Fair Credit Reporting Act (FCRA) requires negative information to be removed from your credit report after a certain time period. For a collection account, that's seven years from the original delinquency date. If you find a collection account older than that on your credit report, you can file a dispute with the credit bureau to have it removed.
Can You Request a Goodwill Deletion?
Beyond these legal grounds for removing a collection account, you may also consider requesting what's called a goodwill deletion. If extenuating circumstances such as a job loss or lengthy illness led to your delinquent payment, you can call or write to the collection agency and ask them to delete the account as a gesture of goodwill. The collection agency doesn't have to comply, but there's no harm in asking.
You may have better luck getting a goodwill deletion if you have a history of on-time payments to the original creditor. When requesting a goodwill deletion, emphasize your otherwise positive credit history and explain any unusual circumstances behind the missed payments.
How to Have Inaccurate Collections Removed From Your Credit Report
To have inaccurate collections information removed from your credit report, you can file a dispute with the credit bureau, contact the collection agency or, in some cases, contact the original creditor.
1. File a Dispute With the Credit Reporting Agency
Start by filing a dispute with the credit bureau that maintains the report where the information appears. You can submit disputes online, by mail or by phone, but doing so online is typically the fastest and easiest.
Here's how to submit a dispute with each of the three consumer credit bureaus (Experian, TransUnion and Equifax):
| Dispute Method | Experian | TransUnion | Equifax |
|---|---|---|---|
| Online | Dispute website | Dispute website | Dispute website |
| Experian P.O. Box 4500 Allen, TX 75013 | TransUnion Consumer Solutions P.O. Box 2000 Chester, PA 19016-2000 | Equifax Information Services LLC P.O. Box 740256 Atlanta, GA 30374 | |
| Phone | Call the phone number listed on your Experian credit report | 800-916-8800 | 888-378-4329 |
When submitting your dispute, clearly explain the error and provide any supporting evidence, such as a canceled check or a bank statement showing payment. (Keep copies of any documents you send.) The Consumer Financial Protection Bureau has guidance for filing disputes and a sample dispute letter you can use.
2. Contact the Collection Agency
You also have the right to contact the collection agency to dispute the incorrect information. If they confirm that there is an error, they're responsible for sending correct information to the relevant credit bureaus.
If the collection agency determines that they aren't in error, you have the right to ask the credit bureau to include a statement of dispute in your credit report. This statement, which is visible when someone checks your credit report, explains that you dispute the collection account and why.
3. Contact the Original Creditor
In some situations, you may need to contact the original creditor who sold your debt to the collection agency. If they confirm that the debt went to collections by mistake, they can contact the collection agency and attempt to resolve the error.
Do I Need to Notify the Credit Bureaus of Paid Collections?
No, you don't need to notify the credit bureaus of paid collections. Once you pay off the debt, the collection agency should alert the three major consumer credit bureaus, which will update their records.
Updating records typically takes a month or so; at that point, the collection account's status should change to "paid." However, it will still take seven years from the date your account first became delinquent for the paid collection account to come off your credit report.
How Do Collections Affect Credit?
Collections can have a significant negative impact on your credit, but how much varies depending on whether the debt is paid, whether it's medical or non-medical and the credit scoring model the lender uses.
For example, VantageScore® credit scores disregard all paid collections, as do newer versions of the FICO® Score☉ Θ (FICO® Scores 9, 10 and 10T).
Newer credit scoring models are more forgiving of collection accounts. VantageScore credit scores and newer versions of the FICO® Score disregard all paid collections.
These credit scoring models also treat medical debt differently than other types of debt.
- Credit bureaus no longer include medical collections under $500 on your credit report, whether paid or unpaid, so they won't impact your credit scores.
- VantageScore credit scores ignore all medical collection accounts, paid or unpaid and regardless of the balance.
- FICO® Scores 9 and 10 consider unpaid medical collections of $500 or more, but weigh them less heavily than unpaid non-medical debt.
However, many lenders still use older credit scoring models that take paid collections into account. For example, FICO® Score 8, which is a popular score for general use, lowers your score if you have paid or unpaid collections of $100 or more. Many mortgage lenders use FICO® Score 2, FICO® Score 4 or FICO® Score 5.
Since you can't know in advance which credit scoring models lenders will use, paying collections over $100 (or medical collections over $500) is one way to minimize harm to your credit. However, paying the collection account in full, if possible, is the best strategy.
How to Improve Your Credit When You Have Collections
You don't have to wait until collection accounts come off your credit report to start improving your credit. In addition to paying unpaid collection accounts, here are some steps to take right away.
- Dispute inaccuracies on your credit reports. You can get your credit reports from all three credit bureaus for free at AnnualCreditReport.com. If you find any inaccuracies, you have the right to dispute them with the credit bureau.
- Pay your bills on time. Because payment history is the most important factor in your credit scores, late or missed payments can have a major negative impact.
- Pay down your credit card balances. Credit utilization ratio, or the amount of revolving credit you're using compared to your credit limits, is a major element in your credit scores. Credit utilization over 30% can more negatively impact your scores; people with the highest credit scores tend to have utilization under 10%.
- Avoid applying for new credit. Each application for credit creates a hard inquiry that can temporarily lower your credit scores by a few points. New credit cards may also tempt you to spend beyond your budget, which could hurt scores.
- Don't close unused credit cards. Even if you no longer use a credit card, keeping the account open can benefit your credit scores. Closing unused credit cards reduces your available credit, which may increase your credit utilization ratio and potentially lower your credit scores. Consider putting a small purchase on your card and paying the balance in full each month.
How to Avoid Future Collections
Practicing positive financial habits can help you avoid accounts going to collections in the future.
- Monitor your credit. Checking your credit reports regularly can provide an early warning of missed payments that can lead to collections. Free credit monitoring from Experian is a convenient way to keep tabs on your Experian credit report and get alerts of important changes, such as changes in your spending or credit utilization, that could signal potential problems.
- Automate bill payment. Paying bills on time (or early) not only helps you avoid collections but can also help improve your credit scores. Consider automating recurring bill payments, and set reminders on your calendar for occasional bills.
- Be proactive with creditors. If you're concerned you may have trouble paying an upcoming bill, reach out to the creditor right away to let them know. Creditors may be willing to lower your interest rate, defer payments or work out another arrangement that fits your budget so you can continue making timely payments and prevent damage to your credit scores.
Tip: If you're struggling to meet your financial obligations, consider consulting a credit counselor at a nonprofit credit counseling agency. They can work with you to develop a budget and a plan to get your payments back on track.
The Bottom Line
Both paid and unpaid collection accounts on your credit report can have a lasting impact, but there are things you can do to minimize their negative effects. For example, you can file disputes to have inaccurate collection accounts removed or approach collection agencies seeking a goodwill deletion.
As you wait for collection accounts to drop off your credit report, there are steps you can take to improve your credit. For example, consider signing up for Experian Boost®ø®ø. This free feature adds your on-time payments for eligible rent, utilities, insurance, phone and streaming services to your Experian credit report, which could give your credit a boost.
