Collection AccountCredit Repair Definition
A debt that has been transferred to a third-party collection agency for recovery.
Definition
A collection account refers to a debt that has been transferred or sold to a third-party collection agency for recovery after the original creditor has been unsuccessful in obtaining payment. This typically happens after an account has been delinquent for 90-180 days. When an account goes to collections, a new collection account usually appears on your credit report in addition to the original delinquent account. Collection accounts are serious negative items that can significantly damage your credit score and remain on your credit report for seven years from the date of the first delinquency that led to the collection. Even after paying or settling a collection account, it will still remain on your credit report, though it will be marked as 'paid' or 'settled.'
Frequently Asked Questions
How much does a collection account lower your credit score?
A collection account can lower your credit score by 50-100 points or more, depending on your starting score and other factors. The higher your score was initially, the more significant the drop may be. Recent collections impact your score more than older ones.
Do paid collections affect your credit score less than unpaid ones?
It depends on the credit scoring model. Newer models like FICO 9 and VantageScore 3.0 and 4.0 ignore paid collections completely. However, older FICO models, which are still widely used by lenders, treat paid and unpaid collections similarly, though paid collections may look better to manual reviewers.
Can collection accounts be removed from my credit report?
Collection accounts can be removed if they're inaccurate (through disputing), if the collection agency agrees to remove them (such as with pay-for-delete), or naturally after 7 years. If the collection agency can't validate the debt when you request validation, it must also be removed.
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