Managing Debt

Debt Collectors Killing Your Credit? Here’s What To Do

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“I want to clean up my credit. How do I take care of collection accounts?” It’s a question we hear often, often from readers like Kim, who wrote on the Credit.com blog:

I have to admit that I have a few collection accounts… Until a year ago, I just stuck my head in the sand and completely ignored the debt because it seemed too overwhelming to tackle. But now I’m trying to face my fears and eventually reclaim my “good/excellent” credit score standing.

If your credit report lists one or more collection accounts, here’s how to tackle them in five steps.

Step 1: Figure Out Who You Owe

This may sound simple enough, but if more than one of your accounts has gone into collections, or if any of those accounts are older, it can get confusing. An account may have changed hands, for example, or you may not have heard from anyone about a debt for a while so you aren’t sure where it stands.

“Debts that remain unpaid long enough will get assigned out to many different collection agencies, or sold to a debt buyer who may use outside collection agencies,” explains Michael Bovee, founder of the Consumer Recovery Network, which publishes a free guide to debt settlement. “Debts can often be sold multiple times. During these later stages of debt collection you can receive letters and calls from half a dozen or more agencies. This can make it tough to determine who it is you should contact to resolve an old collection account.”

He suggests several approaches to tracking down what you owe:

  1. Contact the original creditor to find out whether they have placed it with a collection agency. The original creditor is the company to which you first owed the debt; a credit card issuer, cell phone company, a hospital or a bank, for example. If they tell you they have sold it, then ask for the name of the collection agency to whom they sold it. Keep in mind, though, that the agency may have since sold it to yet another collection agency.
  2. Check your credit reports to see what collection accounts are listed. Bovee also suggests looking at the inquiries section of your report to see if it lists any inquiries from debt buyers or bill collectors. “Get your annual free credit report from all three credit bureaus. They may not all be the same,” warns Mark Neeb, president and CEO of debt collection agency The Affiliated Group, and past president of ACA International. “There may be collection items that appear on one (report) but not on another.” Your credit report should list contact information for each company that is reporting information. If it doesn’t, and you can’t figure out how to contact the collector, ask the credit reporting agency to provide it. (You can get your three main credit reports once a year for free.)
  3. Check your mail for collection notices. Keep copies of any letters you receive while you sort out how much and whom you owe. If you receive a collection letter about a debt you don’t recognize, or aren’t sure the amount is correct, write to the agency immediately and dispute the debt. Under federal law you have the right to request validation of the debt.

If you are dealing with more than one account, it’s a good idea to make a list of all the collection accounts you have identified through this process: the name of the agency, the original creditor, the current balance, and the date you defaulted with the original creditor.

If you decide to call a bill collector, grab a pen and paper first. “Take detailed notes,” says credit coach and Credit.com Contributor Jeanne Kelly. “You want to make sure it is an accurate bill. Take people’s names, extension, where they are located so you know who you have spoken to when you need to follow up.” Keep those notes in a file along with any correspondence, copies of your credit reports, etc. Plan on holding onto this file for a long time, just in case.

If you are hearing from more than one collector for the same account, it can be a challenge to figure out who you should be paying. “It can be a real mess and I feel for consumers who have this issue,” says Neeb. Explain to both collection agencies what is going on and ask them to help verify which one is valid. “Any collection agency that is worth its salt will help a consumer even if it’s not our fault,” he asserts.

Step 2: Decide What to Pay

Collection accounts can be divided into four buckets, Neeb explains:

  1. Ones you know you owe, and the amount is correct.
  2. Accounts you don’t remember and aren’t sure you owe.
  3. Debts that may have changed hands.
  4. Those in which you don’t agree with the existence of the debt in the first place.

The first group — debts you know you owe and the amount is correct — are “low-hanging fruit,” he says. Bovee agrees, adding, “If you are paying off a debt in full, there is not much to it. The collector will be happy to hear from you.”

Deciding how to handle the others may be trickier.

If you dig up a debt you don’t recognize, request written verification of the debt from the collection agency. The FTC points out, “Every collector must send you a written ‘validation notice’ telling you how much money you owe within five days after they first contact you. This notice also must include the name of the creditor to whom you owe the money, and how to proceed if you don’t think you owe the money.”

If they already sent this to you when they first tried to collect the debt, they aren’t obligated to send it again, “but every collection agency I know will,” Neeb insists.

If there was a legitimate dispute about the debt in the first place (for example, you were billed for a service you canceled per the terms of the contract, or for merchandise you returned), you can notify the collection agency that you don’t believe you owe the debt and ask them not to contact you again. If you have proof of why you believe the debt was wrong, you can also ask them to stop reporting it to the credit reporting agencies. Include documentation of your side of the story if you have it.

For older accounts, make sure you understand whether the statute of limitations has expired. If a collector tries to sue you for a debt that is outside this time frame — usually four to six years, but longer in some cases — you can raise the statute of limitations as a defense against the lawsuit. Making a payment, even for a small amount, on debt outside the statute of limitations, however, will usually start the clock ticking again. That means you could open yourself up to a lawsuit at a later date.

One of our readers, Melissa, shared her experience with this:

I had a $100 collection account for a medical bill on my credit report that I wanted to pay off. I called the hospital that was listed as the creditor and they said they couldn’t find my account. A day, and about six phone calls to various companies, later — I found my debt. It was with a company called NCO Financial. They informed me that my balance was actually $871, a $100 debt for my minor daughter (that I was aware of) and a $771 for myself that I had forgotten about and is NOT listed on my credit report. I paid the $100 and told them the $771 from date-of-service 2005 was past the statute of limitations and that I would not be paying it.

Step 3: Pay What You Can

Your next step is to set a budget for resolving these accounts. This means taking a careful look at your income and expenses to figure out how much you can afford to pay. The best deals will be struck when you have saved up cash to settle. If all you can afford is a very small payment on a very large debt, then you may be better off talking with a bankruptcy attorney. “If you are not in a position to follow through with any arrangement, wait until you are better prepared financially to strike a deal,” Bovee advises.

Once you know your budget, you can start contacting collectors to try to settle. “When you are prepared financially to resolve older collection debts, it is often best to make contact with collectors by telephone,” Bovee warns. “Letter writing campaigns to collection agencies are not all that effective.”

We often hear the question, “How much should I offer?” The answer is to try to pay what you can afford. But it doesn’t hurt to start your negotiations lower than that so you have room to haggle. “Getting collectors to settle a debt for ‘pennies on the dollar’ is not that common,” says Bovee. “But a few ‘dimes on the dollar’ is. The approach you take, and the amount you need to be prepared to pay, will vary from one account, or one collector to the next.”

Step 4: Make Payments Carefully

Whether you are paying the balance in full or negotiating a smaller payment, you want to get an agreement in writing from the collection agency before you pay it.

“I had a client who paid a collection company for an account for a phone bill and they never recorded the payment,” explains Kelly. “The phone company got the account back as uncollected and then (it) was sold to another collection company. We had to prove it was paid. This client had the old bank statement showing it cleared her bank but it was a huge hassle, time-consuming, and the new collection did appear on her credit report, which has since been removed.”

It’s also usually best to pay with a certified check from your bank, or using online bill pay from your bank account so you have a record of the payment without providing the agency details about your checking account.

If you are settling a debt for less than the full balance, it’s essential that you get a letter from the collector detailing the terms of the deal, and confirming that no further balance will be due before you make a payment. “No letter, no deal, no exceptions,” insists Charles Phelan, founder of the DIY debt settlement firm ZipDebt.com.

Step 5: Monitor Your Credit Reports

If your goal in resolving these accounts is to improve your credit scores, you will likely be disappointed. Paying collection accounts does not remove them from your credit reports. And, with the exception of the new VantageScore 3.0 model, paying a collection account isn’t likely to help boost your credit scores. These accounts are considered negative, paid or not.

This can be incredibly frustrating. One of our readers, “Alyssa” wrote on the Credit.com blog:

Hello, I recently (within the past month) paid off two credit card accounts that ended up in collections with the intent to fix my credit score by doing so. Now that I have read this, I feel foolish to have even paid them at all. How can I repair and build my credit score now? Since paying off my collection accounts would not help anyway.

Even if taking care of these bills won’t immediately help your scores, there are still advantages to resolving them:

  1. No more collection calls or letters for that debt; and no new accounts if the balance is sold to a new agency.
  2. You don’t have to worry about being sued for the bill. (This is less of a worry for older debts where you can raise the statute of limitations as a defense if you are taken to court.)
  3. You may be able to get loans that are off-limits if you have unpaid collections on your credit reports.) For some mortgage loans, for example, the lender may require you to pay a collection account as a condition of getting the loan.

Of course you have to weigh those advantages against the money you’ll spend. But if you do decide to pay them, it’s a good idea to monitor your credit reports and scores to make sure the accounts are listed as paid, and to make sure that no new ones appear on your reports. In addition to AnnualCreditReport.com, which we mentioned above, you can get an easy-to-understand overview of your credit standing, along with your credit scores, all for free using Credit.com’s Free Credit Report Card.

Image: Hemera

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • Jack Simpsn

    I have a debt to drivetyme and every two or three months they keep re-submitting my debt which causes my credit score to go down. Is this legal? Also, they keep listing the full amount I owe. Arent they supposed to take off what ever they got when they sold the car?

    • Hey Jack

      If they show it as a repo, it will go for the entire amount of the loan, b/c that is what you defaulted on. They will continue to report a regular schedule. Sub-prime lenders may only report quarterly instead of monthly.

      If you can find documents that prove the amount reported is inaccurate then you can dispute it on your report, but that doesn’t mean it will go away. It may just re-appear with the correct value.

      A situation like this will likely stick on your report for the next 7 years. You may try some “magic” credit repair tricks, but because this is likely a legitimate default it will remain.

      This is why people need to try to avoid repos and foreclosures at all costs.

      You may try to contact them and see if making any back payments might encourage them to remove it as goodwill movement because you paid.

      Other than that you can try to build your credit up with secure cards or wait until 7 years have passed. Just be careful that in attempting to raise you score by opening up credit accounts you aren’t putting yourself in a worse position b/c you can’t make the payments.

  • Laura

    Hi!
    I have an odd question. My husband and I had great credit until he had heart surgery a couple years ago, with a whole bunch of complications. He came through it, finally, but now is battling a Stage IV cancer diagnosis. I handle all our books. I have really been going thru a hard time, and just didn’t bother to pay our bills (except the mortgage, car, and utilities). By the way, we have excellent medical insurance, so we didn’t amass any big medical bills.

    That’s the basic background. Now, one by one, over the past year, I have contacted most of our credit card companies and paid/settled the accounts. There are exactly two accounts left.

    Both accounts, it turns out, are with a company called Asset Acceptance Corp. One of the accounts is in my husband’s name (about $4500), and one is in my name (about $4800). I have verified both accounts, but have not contacted them by phone yet.

    Here is my question: Should I try to discuss both accounts with them at the same time, or will the $9000+ total make matters worse? As I said before, my husband is battling stage 4 cancer, and he isn’t dealing with any of this – so I will be the one taking care of it.

    The other thing is, I can afford to send about $1500 per month. It’s a stretch, but I can do that much. How would you suggest I approach this? Try to negotiate, or see if they will accept $1500 per month on the whole balance? Or, should I settle mine and then call back to see if I get a different agent to settle the other one?

    Thanks for any suggestions you can offer. I really want to be rid of these!

    • Michael Bovee

      Laura – If it were me in your shoes, I would wait until I had about 40% of the balance saved up to offer in one lump sum payment to settle both of the debts. Based on what you shared, that could be 2 or so months away. Then call and negotiate the deal, making sure to get everything in writing before paying.

      I would only adjust this strategy if I received a collection letter, or call from an attorney collection agency, before I was ready to settle the debt.

      You could certainly do one debt at a time, but I would not set up payments, just lump sum settlements.

  • http://none Wendy dorr

    Can anyone suggest a credit card for someone with a low credit score? I am looking for a credit card to start over, and I have a low credit score. thank you, Wendy

  • Stacey

    I was wondering in negotiating to pay off or paying off a debt in full to a collection agency, can you ask them to remove the debt after payment from your credit report? If so, how will this affect your credit score?

    • Michael Bovee

      Stacey – It is highly unlikely you will get a debt collection agency to agree to remove the negative item off of your credit report in return for partial or full payment. If the collection agency is just an assignee of your original lender, the agency is not normally the one responsible for the negative on your credit report. Getting your original lender to remove a negative item they are reporting in return for payment is just as unlikely.

      Is this a credit card debt?

  • Stacey May

    I was wondering when negotiating a payoff or paying off a debt with a collection agency, can you ask them to remove the debt from your credit report? If so, how will this impact your credit score?

    • Michael Bovee

      Stacey – What you have described is commonly referred to as “pay for delete”. It is rarely something you will get a debt collector to agree to. In fact, requesting removal of a collection account can lead to more expense.

      Depending on the situation, a collection agency who is just an assignee of your original creditor will have no ability or influence over the negative reporting appearing on your credit. Take a credit card for example. Once the bank charges it off (usually 180 days on nonpayment), the damage is done. Creditors are not going to remove that. Asking the collection agency to remove it in return for payment is telegraphing you have need of an improved credit report either now,or in the near future. They will be less inclined to approve a lower settlement.

      The same thing goes if you are negotiating a payoff with a debt purchaser.

      The very limited instances I have seen a pay for delete approach work is with utility and small medical bills.

  • Scott D.

    In November 2012 I sold my house via a short sale. Except for that, I have never been late on a credit card or any other monthly payment. How long does it take to rebuild my credit and what’s the best way to do it? My score is around 580-640 depending on the credit reporting company. I recently started a job where my income will almost double and plan on paying the only credit card I have off. How can I get my higher income reported to the credit reporting agencies?

    • Credit.com

      Scott — As far as your credit scores go, foreclosures and short sales are both equally damaging so realistically, it’s going to take some time to recover and improve your scores. Credit scores place more emphasis on the most recent 24 months so with your short sale being so recent, it’s important to keep expectations in check and understand that it’s going to hurt for a while. The best thing you can do is to continue doing what you’re doing — paying your credit cards and other accounts on time, and paying down your credit card balances — 10% or less of the credit limit will earn you the most points in that category of your score. Other than that, it’s going to take some time — at least 24 months of positive credit patterns –before you’ll begin seeing any significant improvement and even then, it’ll be gradual.

      In regards to your income, trying to report your income to the credit reporting agencies won’t help because income isn’t reported in your credit reports. It’s a common misconception that credit reports and credit scores factor in income, but the truth is — they don’t. It doesn’t mean income isn’t important — lenders will consider your income before granting a loan, but as far as your credit reports and credit scores are concerned, income has no bearing on either.

      For more on short sales, how they impact your credit and how to recover afterwards, here are three resources that should help:

      1. Why are Short Sales So Bad for Your Credit?
      2. Credit Score Recovery Time from Foreclosures and Short Sales
      3. How Soon Can I Get a Mortgage After Credit Problems?

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  • Nicole

    I was in the hospital in March of 2012. From that stay I had accrued a lot of debt with multiple accounts, and several (3) accounts were placed in collections. I had tried the best I could to keep up with all the other accounts but once something was put into collections I just turned the blind eye. I recently checked my 3 credit scores from my yearly free report, and these 3 past due accounts did not show up anywhere on my report. I have been told by multiple people that I should just let them go and not pay because once I do pay on these accounts, they will then be reported to my credit. Is this true? I know that the damage has been done, but is that necessarily true if, over a year later, they still are not showing up on my credit? And since they are not showing on my credit, does that mean that once I pay they will then show up? Thanks in advance.

    • Gerri Detweiler

      Whether or not you pay these accounts has nothing to do with whether they will appear on your credit reports. If those collection agencies report, they can report them at any time, and making a payment shouldn’t trigger them to report. (I can’t guarantee anything of course!) You may also want to read this article about collection accounts on credit reports: The 7 Biggest Questions About Debt Collections & Your Credit

      It doesn’t sound like these debts are that old. That means that if you don’t pay them it is possible you could be sued. If you believe they are correct and can afford to pay them, it makes sense to go ahead and do so. If you can’t pay the full amount you may want to see if you can negotiate a settlement. (Get any deal in writing first, before you pay.)

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  • http://www.credit.com/ Credit.com Credit Experts

    Darlene — Unfortunately, the Medical Debt Responsibility Act of 2011 fell flat and wasn’t passed. The original bill would have required any medical collections under $2,500 that had been paid or settled to be removed from your credit reports within 45 days, rather than waiting the 7 years that’s currently in place. All hope isn’t lost on this front, however, as new legislation has recently been introduced:

    In April, Rep. Maxine Waters (D-Calif.), introduced HR 1767 – the Medical Debt Responsibility Act of 2013.

    Sen. Jeff Merkley (D-Ore.) also introduced S. 2149 — the Medical Debt Responsibility Act of 2012…

    Credit.com has covered this issue extensively but for more info, here are the highlights:

    Why Medical Debt Reform Could Actually Happen Now
    Proposed Law Could Help Millions Facing Medical Debt
    The Shocking Cost of Medical Collection Accounts on Your Credit Reports
    Time for a Fair Medical Billing Act
    Medical Debt Relief Act: Why I’d Vote For It

  • http://www.credit.com/ Credit.com Credit Experts

    Actually, paying down your credit card balances DOES help when it comes to your credit scores.

    Rather than charging large lump sums and then paying them off, aim to manage the account and pay off the balance in full at the end of each billing cycle. This not only helps your credit scores, it keeps you from paying interest on the debt. The key is paying the balance before the grace period.

    As far as the revolving utilization percentage goes, you may hear many experts provide specific percentages (which is probably where you’re getting the 30% from), but the real answer here is “the lower your revolving utilization percentage, the higher your credit score.” Nothing magical happens at 30%, and 25% is better than 30%, 20% is better than 25%, etc. Bottom line: the lower your revolving utilization, the higher your score. And paying off your credit card balances DOES actually help in two ways:

    1) It helps your revolving utilization percentage.
    2) Another smaller factor in the debt category is the number of accounts with balances. While not as significant as the first, the fewer accounts with balances, the better for your score.

    For more on how credit scores are calculated and what’s used to determine your score, the following resources can help:

    The 5 Things That Affect Your Credit Score
    The Ultimate Guide to Credit Scores

  • lee1974

    I have an old medical bill that went into collections. This account has been sold and moved around a few times. I discovered that every time a new company buys this account they add it to my credit report. I currently have the same bill on my credit report from 3 different companies. So now instead of owing $3000 it now appears that I owe $9000. Is there a way to fix this?

    • http://www.Credit.com/ Gerri Detweiler

      Yes Lee. First of all – how old is it? When was the bill due to the medical provider? Collection accounts may only be reported for 7 years and 180 days from the date the payment was due to the original creditor. That’s true regardless of whether it was paid or not. So if debt is older than 7.5 years it shouldn’t be on your credit reports at all.

      Secondly, if it is not that old, then you can dispute all but the most recent collection account. On your dispute, note that this is a duplicate entry for the same debt. You’ll learn more about this in these posts:

      A Step-By-Step Guide to Disputing Credit Report Mistakes and

      Credit Report Double Jeopardy Means Double Damage

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  • http://www.Credit.com/ Gerri Detweiler

    Yikes! It’s not good. That increases the number of collection accounts. Any clue why they did that??

  • http://www.Credit.com/ Gerri Detweiler

    As far as the hospital collection accounts go, it sounds like you are doing what you can at the moment. if the bills are consolidated into one it will reduce the number of collection accounts so that may help.

    As for the loan mod, if you completed a modification under the Home Affordable Loan Modification program, then our understanding is that your report should not be adversely affected now that you are in permanent modification status. (That is not necessarily true if you completed a non-HAMP loan mod, since those aren’t regulated the same way.) If that’s the case, and it’s been months since you completed it, I’d suggest you file a complaint with the Consumer Financial Protection Bureau. They will likely contact the bank to get a response – and maybe then you can get it corrected.

    Good luck and please keep us posted!

  • http://www.Credit.com/ Gerri Detweiler

    Unfortunately, as an adult she was probably legally responsible for those bills. Paying collections doesn’t remove them from credit reports. However, she may try disputing them on her credit reports. If they are not confirmed, they may be removed.

  • http://consumerrecoverynetwork.com/ask-a-question/ Michael Bovee

    If you owe a legitimate debt, it really does not go away, even after it expires off of your credit report. How long ago was it that you last made a payment on this debt?

    PRA would not necessarily have to update the credit reports as a result of acquiring another company.

    What is your goal for this account?

  • http://www.Credit.com/ Gerri Detweiler

    The length of time this account can remain on your credit report is different than the statute of limitations. Collection accounts may be recorded for 7 and a half years from the date you first fell behind with the original creditor. Whether or not you pay it won’t change that.

  • http://www.credit.com/ Credit.com Credit Experts

    Not sure I understand your question. Could you explain a little more?

  • http://www.Credit.com/ Gerri Detweiler

    Bethany,

    I need to understand what happened here. Did you dispute it and it was removed, then later the same account reappeared?

    Or did it just disappear then a new account for the same debt was reported?

    When did you first fall behind with the original creditor?

    • Bethany

      It just disappeared. I did not dispute it. Then it reappeared with the same collection agency. I believe it was sometime in 2009 that I fell behind. The account was opened by the collection agency in 2010.

  • http://www.Credit.com/ Gerri Detweiler

    Don’t pay until you get something in writing that it will be removed. Once you’ve paid it you have lost your leverage. Did they clearly make a mistake on the address? If so, then tell them they need to pull it back from collection and let you pay them directly – or you will contact a consumer law attorney about a credit damage case.

    Or just contact a consumer law attorney!

  • http://www.Credit.com/ Gerri Detweiler

    Elaine – i am not sure I understand the situation. Did you stop paying in Oct 2013 when you still had an outstanding bill? If so, then it was probably within their rights to send it to collections. Please let me know if I misunderstood.

  • http://www.Credit.com/ Gerri Detweiler

    Were you both on the written lease? I am not an attorney but from my understanding you are fully responsible if you signed the lease. The collection agency isn’t under an obligation to agree to do pay for delete deals; in fact, they really aren’t supposed to do them under their terms of their agreement with the credit reporting agencies. As far as your roommate goes, you’ll need to get advice from an attorney but my guess taking her to small claims court would be the way to go. I apologize if I didn’t understand the situation fully, but when you cosign a lease or any kind of debt you agree to be fully liable for the debt.

  • http://www.Credit.com/ Gerri Detweiler

    Amber – if you were late then those late payments will be reported for seven years. But if the lender misapplied some of your payments those specific mistakes should not be on your credit. I’d suggest you read:
    A Step-By-Step Guide to Disputing Credit Report Mistakes

  • raj

    Hi, I have couple bills that are in collection center for 2-3 years but i have been paying 10-15 dollar per month, does 5 year of statue of limitation (idaho) still holds? Does it kick in when i am not paying for 5 years or it is still valid even if i am paying small amounts? Thanks!

    • http://www.credit.com/ Credit.com Credit Experts

      Hi Raj —
      The statute of limitations typically applies to the time since the last payment was made (not the time when the debt was incurred). You can read more about that here: Does Your Old Debt Have an Expiration Date?. Hope that’s useful to you.

  • http://www.Credit.com/ Gerri Detweiler

    That is correct. (7 years + 180 days from the date you fell behind with the original creditor – the hospital or medical provider.) However if you are sued for any of these debts and they get a judgment against you, that judgment will start a new reporting period. In addition, you may receive 1099-Cs reporting unpaid debt as cancelled income. What is a 1099-C? Your Top 11 Questions Answered

  • http://www.Credit.com/ Gerri Detweiler

    Hi Tony – Yes, it may be reported by the new company but that doesn’t reset the clock. The collection account may only be reported seven years + 180 days from the date you first fell behind with the original creditor. That date carries over to all reporting of this debt. After that time period no one can report it. (The only exception would be if they sued you and got a court judgment which would have its own reporting period.) Since you say it is an old debt, make sure you understand the statute of limitations. I wrote more about this here:

    Does Your Old Debt Have an Expiration Date?

  • http://www.Credit.com/ Gerri Detweiler

    Ask the school if they can pull it back from collections so you can pay them. If they can do that, then it may be possible to get the collection account off your credit reports. If not, then it doesn’t really matter – though some people feel more comfortable paying the original creditor. Whatever you end up doing, make sure you keep written proof that the debt was paid and put it somewhere where you can find it for a very long time.

    And unless they pull it back from collections (which may result in it falling off your credit), collection accounts are reported for seven years plus 180 days from the date you first fell behind with the original creditor.

  • john

    I just got contacted by a collection agency for a bill I didn’t pay back in 1992.. Can this still
    adversely effect my credit score if the Statute of Limitations has expired?

  • Tracy

    I’m trying to help my sister with an old credit card debt – last activity was 12/2006 so it is beyond the 6yr statute of limits in TN. Is there any way to do a settlement without opening up without restarting the statue?

    • http://consumerrecoverynetwork.com/ask-a-question/ Michael Bovee

      Tracy – Yes there is. Are you negotiating on her behalf with written authorization?

      Is there a specific credit report concern that has prompted her to want/need to settle at such a late stage of collection?

  • http://www.Credit.com/ Gerri Detweiler

    That is a myth unfortunately. Please read this article: Four Medical Bill Myths That Can Cost You Dearly

  • http://www.credit.com/ Credit.com Credit Experts

    Technically it is 7 years plus 180 days from the date you first fell behind with the original creditor, leading up to the account being placed for collection. The date of last activity (DLA) is not necessarily relevant.

  • http://www.credit.com/ Credit.com Credit Experts

    If you can get the medical providers to pull the accounts back from collections, that is your very best solution. Failing that, yes, you should definitely get a letter from them agreeing not to report it. And make sure you keep copies of all correspondence and all documents pertaining to the payment of these bills.

    It’s a good idea to keep tabs in your credit scores. You can get a free look at two of them on Credit.com’s free Credit Report Card. It sounds as if you’re checking credit reports, and that’s a good thing.

    If you find that there are mistakes, you can dispute them. These resources may be useful to you:
    A Step-By-Step Guide to Disputing Credit Report Mistakes
    The Ultimate Guide to Solving Your Medical Bill Problems
    Is It Ever Too Late to Negotiate a Medical Bill?

  • Lori K Logan

    I had a small claims case in October dismissed w prejudice over a collections debt for a credit card because they had no paperwork or signature for evidence. I got the negative item deleted off all three credit reports after the court case was dismissed. The same collection agency is still checking my credit report twice now. Is this legal and if so why are they doing this?

    • http://www.credit.com/ Credit.com Credit Experts

      The short answer is we don’t know why they are checking your credit or whether it is legal. It would be a good idea to check with your state attorney general’s office to find out if it’s legal, and we recommend submitting a complaint to the Consumer Financial Protection Bureau.

  • http://www.Credit.com/ Gerri Detweiler

    Probably not but it may depend on state law. That technique is usually used to settle debts for less than the full balance, but some courts have found the practice puts the creditor at an unfair disadvantage. Plus, even if they do cash it and they don’t delete it, I have a hard time seeing how you are going to get the credit reporting agency to change it based on this technique.

  • http://www.credit.com/ Credit.com Credit Experts

    You’ll need to get credit reports from each of the three credit reporting agencies and dispute the information with each of them. Credit.com has some resources that may be useful to you in doing so:
    How to Get Your Free Annual Credit Report
    How to Read Your Credit Reports
    How Do Dispute an Error on My Credit Report?

    Good luck to you in getting this resolved quickly.

  • http://www.Credit.com/ Gerri Detweiler

    Unfortunately if the information is accurate it can be reported for approximately seven and a half years. They aren’t under any obligation to remove them unless the information is inaccurate. It is a big problem, but I don’t have an easy solution to offer you. I wrote more about there here:

    Could A Medical Collection Account Keep You From Getting A Mortgage?

  • http://www.credit.com/ Credit.com Credit Experts

    First, ask the collector some questions. By law, they must verify the debt (this will be done via postal mail).
    It’s also smart to understand the statute of limitations that applies to your debt. These state laws give creditors and collectors a certain number of years to successfully sue. If they try to take you to court after that time period, that may be illegal.
    Here are a couple of resources about debt collections that may be useful to you:
    The Ultimate Guide to Debt Collections
    The Dos and Don’ts of Paying a Debt Collector
    Above all, stay calm and don’t pay or agree to pay a debt you don’t believe you owe.

  • http://www.Credit.com/ Gerri Detweiler

    If you file a written dispute they must respond and make the correction within 30 days, not 60. That sounds like a serious mistake, though, so follow up in writing and keep copies of everything, including a copy of the credit report with the error.
    A Step-By-Step Guide to Disputing Credit Report Mistakes

  • Musci1

    I paid a bill that was in collection a few years ago (paid in full) NOW the dentist office that put me in collection is telling me I need to pay THEM now for the same bill? Is this legal?

    • http://www.credit.com/ Credit.com Credit Experts

      You should not have to pay for the same servicesl twice. Do you have anything documenting your having paid this bill already? If the office continues to insist that you owe for a debt you have already satisfied, you may want to get in touch with a consumer law attorney.

  • http://www.Credit.com/ Gerri Detweiler

    It depends on what kind of a rush you are in. If there is a loan you are trying to qualify for, then it may make sense to file your own dispute. Otherwise, perhaps just wait until it gets updated.

  • http://www.Credit.com/ Gerri Detweiler

    The date of last activity is not the date that affects when it comes off the report. It’s the date of first delinquency – the date the bill was due with the original creditor that he missed – that matters. The collection agency should report that, though how it appears on the report depends on how it is reported. Here’s an example of how Experian reports it.

    The consumer probably knows when this all took place and has at least a rough idea of when that time period started. He should try to match it up with what’s on his credit reports, and if it is not clear that it is being accurately reported, contact the credit reporting agencies for clarification.

    Does Your Old Debt Have an Expiration Date?

  • Anton piotrowski

    I have been paying my monthly payment but as my account is in recovery department it is still giving me a default on my credit history I have paid on time for last two years and still it’s a default what can I do

    • http://www.Credit.com/ Gerri Detweiler

      Unfortunately it will continue to be reported that way unless you can bring it current – unless they are willing to work with you and report it as current. I’d encourage you to ask.

  • http://www.Credit.com/ Gerri Detweiler

    As to the first question, I would suggest you contact the creditor, explain what happened and ask them to make sure the debt is pulled back from collections. If you paid the original creditor in full they should be willing to do this for you. If they won’t, file a complaint against both the provider and the collection agency with the Consumer Financial Protection Bureau.

    As for the second instance, it is very unusual for a creditor to remove a charge off just because you paid it. In fact, they are not supposed to do “pay for delete” deals under their contracts with the credit reporting agencies.

    You can’t always change the past but you can pay on time going forward and over time the old information will carry less weight when your credit scores are calculated.

  • Adam Malik

    hello, i defaulted on a loan, the loan was then sold to an debt recovery agency, i paid them in full 3 years ago, a week ago i went on my credit file, and the debt recovery company have not updated my file, they stated 3 years ago that they would. my credit file states that i am still in-default. I contacted them and they said its not there problem as its the original lenders problem to update it. i called them and they said they sold it on to the debt recovery company they are also unaware of any payments made, they also told me that the debt recovery company should update the file, what should i do?

    • http://www.Credit.com/ Gerri Detweiler

      What do you mean by debt recovery agency? Can you be more specific? How is it listed on your credit reports?

  • Ashley

    I am helping my husband clean up his credit. All the accounts are with collection agencies for unpaid medical bills. One agency has three accounts. The original debt is about $3800. They said they can either settle for a lower amount and report it as paid in full. OR we pay $5K and they will have it deleted off his credit completely. Also, the debt is from 2008 and should fall off in about a year and a half. What do you recommend? Also, they claim that once it has been deleted the credit should rise about 20 points for each deleted account. Is this true?

    • http://consumerrecoverynetwork.com/ask-a-question/ Michael Bovee

      Ashley – Skilled and compliant debt collectors do not discuss your credit score impacts from settling or paying the debt.

      With as many collection scams as there are out there, it can pay (literally) to be certain you are dealing with the right collection agency or debt owner. What is the name of the collection outfit you are dealing with? What state are you in?

      • Ashley

        California and they are called Metro Republic. They are listed on my credit report as the company who is holding the debt. Also, two of the debts say they are closed. What does that mean? He told me that if i pay by tomorrow (last day of the month) that they will delete and that i can even go to their office and pick up a signed letter stating that they are going to delete it off the credit completely. They are listen on the BBB and have a A+ rating since opening in 1980

        • http://www.Credit.com/ Gerri Detweiler

          Ashley – what state are you in?

        • http://consumerrecoverynetwork.com/ask-a-question/ Michael Bovee

          If the collector is legitimate (aside from the credit score references being more than just questionable), and you agree and pay, what do you get?

          Are you trying to get a mortgage, or refinance?
          Are you looking for an auto loan in the next 18 months? What are your families credit goals in the near future?

          The debt in California is passed the SOL to legitimately sue (4 years), in order to collect from you. About the only leverage the debt collector has is your credit, and he may have made a serious error in the way he used that leverage.

          I do have additional feedback, but will wait to hear back about your credit goals.

          • Ashley

            The bills are all medical from when my husband was young. We want to buy a new car and recreational toys with a good interest rate as well as purchase a home in he next 1-2 years. So building credit up is now a huge priority.

          • http://consumerrecoverynetwork.com/ask-a-question/ Michael Bovee

            If your goals are set to, or can be postponed several months, and be consistent with the time frame that these fall of the credit report, consider waiting.

            If you are going to be financing large dollar purchases sooner, I would try to get the debt removed.

            Because of the credit report and score carrot/stick angle this debt collector used, it would not hurt to talk to an experienced consumer collections law attorney about how you might be able to view that as you go about accomplishing your goals.

  • John

    Last month I challenged an item on my credit report from Affiliated Acceptance Co which is a Billing/Collection co for health clubs and gyms. There was an item open for $180 listed under collections on my credit report from early 2009 slated for removal in 2016. Anyways, I received a resolution summary from Transunion that only stated “new information” yesterday without explaining what the new info is. Today I checked my info on credit karma to see if there was any clarity. It shows up on credit karma as a newer item, “reported April 30,2014, missed 1 payment, opened Feb 17, 2009″. My score actually went up by12 points. The debt is actually valid. My question is, should I just pay the $180 now to clear it up? Or is my contact with them going to reopen the many months of col or missed payments?

    • http://www.Credit.com/ Gerri Detweiler

      I am a bit confused by your question. With a collection account paying it doesn’t generally help your scores. The only risk in not paying is that you could be sued or that it could be sold to another collection agency which could start a new collection account (which would affect your scores then).

      Hopefully this article will answer your question:
      Link text

  • nicole

    Just had an old medical bill that was already reported on my credit by a collection agency show up on my report again and it lowered score 40 points. Apparently they sold to a new agency but now it is hitting me again and it also shows a newer date which I know the original debt was from years ago.can they do thia? Can they dock u twice?

    • http://www.credit.com/ Credit.com Credit Experts

      It shouldn’t happen, but it often does. This Credit.com post addresses the situation and what you can do about it:

      Credit Report Double Jeopardy Means Double Damage

      Hope these tips can help you get it cleared up.

  • http://www.credit.com/ Credit.com Credit Experts

    First, we’re not lawyers and can’t give you legal advice . . . That said, the letter you received should be sufficient proof that the debt will be removed. (Often people who are in debt seek letters such as yours before sending payment to be sure that paying it will indeed result in the negative item being removed.) Given that they have committed themselves in writing to taking the item off your report and confirming it with you, it seems almost certain that paying the debt will help your credit.)

  • http://www.Credit.com/ Gerri Detweiler

    It sure does sound shady! You have two options. One is to contact a consumer law attorney to find out if they have broken the law. The other is to file a complaint with the Consumer Financial Protection Bureau. If I were in your shoes, I’d probably start with the attorney and if they can’t help, contact the CFPB.

  • http://www.credit.com/ Credit.com Credit Experts

    Your father is right that “pay for delete” is not permitted per the collection agencies’ agreement with the credit reporting agency. That’s not to say it never happens.

  • http://www.Credit.com/ Gerri Detweiler

    Have you checked your credit reports to make sure it’s not reported on your credit? Here’s how to get your free annual credit reports.

  • http://www.credit.com/ Credit.com Credit Experts

    Paying a collector in full will not erase the negative from the original creditor (when the bill first was late), so it will not be as if the bill never existed. You can find more information here: Will Settling a Collection Account Hurt My Credit?

  • http://www.Credit.com/ Gerri Detweiler

    You sent the letters to the collection agencies? I would suggest you dispute the accounts directly with the credit reporting agencies that list those accounts. If the collection agencies don’t respond to the credit reporting agencies, the accounts will be removed. More information here: A Step-By-Step Guide to Disputing Credit Report Mistakes

    Or you could contact a consumer law attorney and/or file a complaint with the Consumer Financial Protection Bureau.

  • Jackie

    I have 3 medical collections being collected from the same CA totalling $797. One of the collections was for my minor daughter who had insurance at the time. I picked up the files from the hospital and it shows “no insurance” on her file. I contacted medicaid and they sent me proof of her eligibility for that time period. Would disputing this with the proof be enough to get it removed? Also, the SOL for collecting will be up in October of this year. I want to settle for a lesser amount, but they informed me they would not delete unless paid in full. Is it possible to settle for a lower amount outside SOL and have it marked as paid??

    • http://www.Credit.com/ Gerri Detweiler

      Unfortunately the “no insurance” issue should have been handled closer to the time the services were rendered. Of course that isn’t always easy to catch – especially if you didn’t know you were going to get billed by that provider. But for future reference, if you see a medical provider and don’t get an Explanation of Benefits from your insurance company or a bill from the provider you want to find out why.

      If the provider was in your insurance network and you did provide them with your insurance info and they failed to bill it then they are likely in the wrong. Have you talked to them about pulling it back from collections? We wrote about that here:

      Reader Stops Mysterious Medical Bill From Damaging Her Credit

      Having said that, you can try to dispute it with the collection agency but it’s going to be tough to prove that you were in the right (for the reasons I just described).

      The collection agency is not required to remove an account in exchange for payment. In fact, they really aren’t supposed to do that under their contracts with the credit reporting agencies. So it’s always a bit of gamble.

      I can’t tell you which route to go – it’s really going to be your call based on your finances and your situation. But I certainly wouldn’t agree to pay and extend the statute of limitations (or even concede that I owe the debt) without some guarantee in writing this will be removed. And remember it comes off your credit report 7.5 years from the date with the original provider was missed, regardless of whether it is paid, unpaid or settled.

  • austin

    I had a medical bill go into collections. After settling and agreeing with the collection company on a pay for delete the item was removed. Now the debt has reappeared through a different collection company. What can I do?

    • http://www.Credit.com/ Gerri Detweiler

      Have you contacted the new collection agency to find out what happened? Was it an error? Or did the first one sell the “balance” to the second? I think you need more information.

  • http://www.Credit.com/ Gerri Detweiler

    This is not an easy situation to resolve since the utility is alleging you never closed the account and unless you have proof you did, it’s going to be tough to prove your side of the story. Are the people who took it over willing to write a letter accepting responsibility? That might get you off the hook.

    In addition, you have the right to dispute a collection account. Do so in writing and send it certified mail. You can state that you closed the account on XX date and that the debt is not yours. In addition, you may want to file a complaint with the utility commission that regulates those utilities.

  • http://www.Credit.com/ Gerri Detweiler

    The statute of limitations typically starts when you make your last payment. If you didn’t make any payment then it would be from when the payment was due that you missed.

    If you provided the medical provider with her Medicaid information and they incorrectly documented it (and did not bill) then you need to take it up with them.

    You really need to try to get the medical provider to pull it back from collections due to their error as I mentioned in the article above. My concern is that it will be your word against theirs and they aren’t going to want to acknowledge their mistake. If they refuse, you may have to file complaints everywhere you can and think of (BBB, CFPB, state attorney general).

    However, I also recommend you dispute the account in writing with the collection agency. Explain that you provided her Medicaid information and they did not properly bill it.

    When did she see this medical provider and what state do you live in?

  • http://www.Credit.com/ Gerri Detweiler

    I think that’s smart, however it’s possible they use an offsite billing department. But see where you can get with them.

    Put your dispute to the collection agency in writing via certified mail to protect your rights. Same thing with your credit reports. To protect your rights your best bet is to send a written dispute to each bureau by a method that includes proof of delivery.

    Let me know what happens!

    PS: Still not sure when this all happened – what year?

    • Jackie

      Sept/Oct 2008

      • http://www.Credit.com/ Gerri Detweiler

        It sounds like the statute of limitations will expire this fall (that’s according to my sources but I am not an attorney so please don’t take it as legal advice). Also the debt should come off your credit reports around March 2016. So I guess at this point you have to make a choice about whether you want to try to fight it or wait it out…

  • http://www.Credit.com/ Gerri Detweiler

    Got it. Will you let me know what happens?

  • http://www.Credit.com/ Gerri Detweiler

    It may. Proceed with caution. You may want to get advice from the Texas Consumer Complaint Center.

  • http://www.Credit.com/ Gerri Detweiler

    I am surprised you can’t get a secured card. Why are they turning you down?

  • http://www.Credit.com/ Gerri Detweiler

    That’s not correct. It should list the original date of delinquency – the date you first fell behind with the original creditor – accurately and that date starts the reporting period of 7 years + 6 months. (Don’t worry about date of last activity which should have nothing to do with how long it is reported.) If the original date of delinquency is wrong or not clear, dispute it with the credit reporting agency in writing first. More information on credit report disputes can be found here: A Step-By-Step Guide to Disputing Credit Report Mistakes

  • http://www.Credit.com/ Gerri Detweiler

    Cable bills don’t typically appear on credit reports until they wind up in collections. You can contact the collection agency and request they verify the debt. I am not clear from your question whether you believe the debt is valid or not…?

  • http://www.Credit.com/ Gerri Detweiler

    Ellen – They aren’t required to validate the debt with you before they turn it over to collections. However, once you hear from the collection agency you can immediately dispute it in writing. When did you first hear from the collector? Did you do that?

    As for dates, it depends on what date you are talking about. The report may list a date of last activity or date placed for collection but those dates don’t affect how long the account may be reported.

    What are the circumstances behind this? Perhaps with a little more information I can try to point you in the right direction.

  • http://www.Credit.com/ Gerri Detweiler

    We have written two articles that I think will help you: Will Settling a Collection Account Hurt My Credit? and The 7 Biggest Questions About Debt Collections & Your Credit. Would you mind reading those first and then if you still have questions, let us know?

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