What types of financial accounts can be sent to a debt collection agency if you’re behind on payments? When an account is sent to collections, it will typically also be listed on your credit report and used to calculate your credit score. Unfortunately, debt collections negatively affect your credit score and can continue to impact it even after you’ve paid off the balance.
When does the countdown begin?
The credit reporting period for debt collections starts from the date of the delinquency that triggered the collection. In the case of debt collections resulting from account settlement, the countdown begins from the date of the account settlement (not from the date of the first 30-day delinquency prior to the settlement). So, if you were delinquent in February 2013 and the account was settled in July 2013, the account should drop off after July 2020. Some copies of your credit report may include phrases indicating when the collection account will fall off, such as “Scheduled to report until 06/2020.”
When will a paid collection drop off your credit report?
While it’s best to pay off a debt collection, paying it does not immediately remove the account from your credit report unless you negotiate in advance for the account to be removed upon payment. Unless you negotiate a pay-for-delete agreement, the collection will remain on your credit report for the entire credit reporting period, and the outstanding balance will be updated to $0. However, a paid collection can improve your credit score and may look better when applying for new credit.
6 Common Myths About When Collections Will Fall Off
There are some common misconceptions about what affects the end date of the collection account on your credit report. Here’s a list of other dates that do not affect the end date of the collection account on your credit report:
- Activity on the collection: This includes payments, payment arrangements, or talking to the collector about the debt. This does not restart the countdown of the credit reporting period for debt collections. However, it does affect the statute of limitations for legal action, which is a different time limit that determines how long a collector can sue you for the debt.
- Prior late payments: Suppose you were 30 or 60 days late on the account in June 2019 but made payments on time for several months afterward. Then you became late again in December 2019, and your account became delinquent and was later sent to a debt collection agency. Those prior late payments in June do not affect the end date of the collection on your credit report because you returned the account to good standing again. (Those prior late payments also have a seven-year reporting period, but they will show with the original account date, not with the debt collection.) It’s the second set of late payments that starts the countdown to the collection’s end date on your credit report.
- Date the debt collection agency took over the account: Throughout your debt collection process, different collection agencies may collect the amount owed on the account. These may show up on your credit report, but the delinquency date does not change as it is based on the original account. If a debt collection agency reports a different delinquency date, you can dispute the error and possibly even sue the collection agency for violating federal law.
- Account opening date: Unless the situation was that you opened the account without making any payments, or it was a medical debt that was missed on the same day you received the services.
- Date
- Account Settlement Date: If it took you two years after the original delay in paying the debt, you still have only five years before the debt collection account leaves your credit report.
Closing the Account: Whether you closed the account or it was closed when sent to debt collection agencies, this date does not affect the countdown to your credit report.
Reviewing Your Credit Report for Answers
If you are wondering when a specific collection account will disappear from your credit report, obtain a copy to review it. You can get a free copy from AnnualCreditReport.com once a year. Review the original date of the account to check the date of delay and add seven years to that date. This is approximately when the collection account will be done.
Frequently Asked Questions (FAQs)
When do collections disappear from your credit report in Canada? In Canada, most negative items will disappear from your credit report after six years. There are some instances where negative marks may disappear from your report earlier or later than six years, but you can expect most negative information to last for six years.
How long do debts stay in collections? The legal time limit that determines how long you are legally responsible for debts depends on the type of debt and the province you live in. Generally, most debts come with a legal time limit ranging from three to six years, but some debts can be collectible for more than a decade. After the legal time limit ends, you are not legally required to pay the debt, although that does not protect you from the effects of negative credit reporting.
Thank you for your feedback!
Sources:
- Experian. “Collections on Your Credit Report.”
- Federal Trade Commission. “A Summary of Your Rights Under the Fair Credit Reporting Act.”
- Consumer Reports. “Credit Reports Soon Won’t Include Some Tax Lien, Civil Judgment Data.”
- Equifax. “Collection Accounts and Your Credit Scores.”
- Government of Canada. “How Long Information Stays in Your Credit Report.”
Source: https://www.thebalancemoney.com/when-do-debt-collections-fall-off-your-credit-report-960584
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