The Truth About Collections: How They Impact Your Credit

Collection accounts are one of the most damaging items that can appear on your credit report. A single collection can drop your score by 50-100 points and make it extremely difficult to get approved for credit.

How Collections Happen

When you fail to pay a debt (credit card, medical bill, utility, etc.) for 90-180 days, the original creditor may "charge off" the account and sell it to a collection agency. The collection agency then reports the account to credit bureaus.

Credit Score Impact

Collections damage your score in two ways:

• Payment History Impact: The original late payments before charge-off
• Collection Account Impact: The collection itself appearing on your report

The impact is worst when the collection is new and gradually lessens over time.

How Long Collections Stay on Your Report

Collection accounts remain on your credit report for 7 years from the date of the original delinquency (not from when it went to collections). After 7 years, they must be automatically removed.

Paid vs. Unpaid Collections

Contrary to popular belief, paying a collection doesn't remove it from your report or significantly improve your score under older FICO models. However:

• Newer FICO and VantageScore models ignore paid collections
• Some lenders require collections to be paid for approval
• You'll avoid lawsuits and wage garnishment

Your Legal Rights

Under the Fair Debt Collection Practices Act (FDCPA), you have the right to:

• Dispute the debt within 30 days of first contact
• Request validation of the debt
• Stop harassment from collectors
• Sue for violations of your rights

Removing Collections from Your Report

You can remove collections through:

• Disputing Errors: If the collection has inaccurate information or violates Metro-2® compliance
• Pay-for-Delete: Negotiating removal in exchange for payment (not all collectors agree)
• Goodwill Letters: Asking for removal after payment as a gesture of goodwill
• Statute of Limitations: Collections older than 7 years must be removed

Get Professional Help

Use OriumAI to generate FCRA-compliant dispute letters that cite specific violations and legal requirements. Our AI finds Metro-2® compliance errors that give you the strongest ground for removal.