Collection accounts are derogatory marks that appear on your credit report when you have a debt that’s sent to a debt collector. Collections cause a dramatic drop in your credit score, and the stain on your payment history can make it difficult to qualify for new loans and credit cards.
Thankfully, collections don’t stay on your credit report forever, and their negative effects diminish over time. Exactly how long you can expect a collection to last depends on the type of debt it is and what steps you take after it’s sent to collections.
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When do collections automatically fall off your credit report?
Generally speaking, collection accounts automatically fall off your credit report 7 years after your first missed payment. 1
Most collections appear on your credit report after the debt has been charged off, which usually happens once you have a payment that’s 120–180 days overdue. 2 However, they share the same start date as the original debt, meaning that even if the collection account was added to your credit report months after your debt was charged off, it’ll still fall off your credit report after 7 years have passed since the date of your first missed payment. 3
Moreover, the date that starts the 7-year countdown will remain the same, regardless of whether your collection account is transferred or sold from one debt collection agency to another. Although debt collectors have been known to report old debt as new to make collections stay on consumer credit reports for longer (known as “debt re-aging”), this is an illegal practice.
Exceptions to the 7-year rule
The 7-year credit reporting limit doesn’t apply to all collection accounts. There are some notable exceptions:
- Federal Perkins Loans: Under the Fair Credit Reporting Act (FCRA), certain types of student loan collections can remain on your credit report longer than 7 years. 1 Specifically, collections for federal Perkins Loans can remain on your credit report as long as they’re unpaid. 4 However, you can get a federal student loan collection removed from your credit report altogether by enrolling in student loan rehabilitation. 5
- Medical collections covered by insurance: You have more options for getting medical collections removed from your credit reports than for deleting non-medical collections. For example, a medical bill in collections (e.g., an unpaid hospital bill) that’s later covered by your insurance company will automatically be deleted from your credit report. 6
- Fraudulent or erroneous collections: If there’s a collection account on your credit report that doesn’t belong to you, then you need to file a credit dispute with the credit bureaus and the company that reported the account. If it’s the result of identity theft, then you should also file an identity theft report with the Federal Trade Commission. The credit bureaus will then remove the collection from your credit report.
Do all collection accounts appear on credit reports?
Yes, all collection accounts—whether paid or unpaid—can show up on your credit report. Debts are usually sent to collections if they go unpaid for a long period of time. They show up on your credit report as a new collection account, not as the original credit account.
This means that you can have different negative items (e.g., late payments and collections) associated with the same unpaid debt, but they’ll all be removed from your credit report 7 years after your missed payment.
How medical collections are reported differently
It’s worth noting that credit reporting agencies treat medical collections differently from non-medical collections in terms of how (and when) they add them to your credit history.
Equifax, Experian, and TransUnion don’t add medical collections to your credit report until 1 year after they’re sent to a debt collector (previously this period was 6 months). Moreover, these accounts are removed from your credit report entirely if they’re later paid by your health insurance company. 8
How do collections on your report affect your credit score?
In general, collections seriously damage your credit by affecting your payment history, which is the most important factor considered in the calculation of your credit score.
The exact impact a collection account will have on your score depends on several factors, including:
- The type of credit scoring model used
- The type of debt it is
- Whether (and how) you’ve paid it
- Your personal credit history
For example, here’s how different types of collections can have different effects on your credit score:
- Paid collections: Newer scoring models like FICO 9, VantageScore 3.0, and VantageScore 4.0 ignore paid collections and don’t factor them into your credit score at all. 9 10
- Settled collections: If you negotiate a debt settlement instead of paying off your collection in full, your account will appear as “settled.” While settled accounts aren’t as bad as unpaid collections, they’re still more damaging to your score than having a collection account reported as “paid in full.” 11
- Medical collections: Newer credit scoring models like VantageScore 4.0 and FICO 9 weight unpaid medical collection accounts less heavily than other collection accounts. However, older models like FICO 8 don’t distinguish between medical and non-medical collections and are still commonly used by lenders.
- Small collections: If the amount you owe on a collection account is less than $100, newer FICO models (FICO Score 8 and onwards) will ignore the account as a “small-dollar nuisance,” which means it won’t affect your score at all. 12
Does paying off collections increase your credit score?
Yes, as mentioned, paying off collections can sometimes improve your credit score, although only in newer scoring models.
How much your score will increase after you pay off your collection depends on your credit history. The better your score was to begin with (before the collection account appeared), the worse the collection account will have hurt it, and the more your score will improve once you pay the collection account off. 13
Can you get collections removed from your credit reports early?
There are several approaches you can try to remove collections from your credit report. They’re not guaranteed to work, but there’s no harm in trying:
- File a credit dispute: You can dispute the collection account by sending a credit dispute letter. Send it to the credit bureaus and the company reporting the debt and ask them to remove the collection from your credit reports.
- Goodwill deletion: This approach can sometimes get paid collections removed from your credit report. Essentially, it consists of asking the company reporting your collection (e.g., your creditor or debt collector) to delete it as an act of kindness. All you need to do is send them a goodwill letter explaining your situation, e.g., why you were unable to pay the debt on time. This will work better if you had a genuinely good reason, such as unexpected medical bills that strained your finances.
- Pay for delete: If you haven’t paid your debt yet, you can try negotiating with whoever owns your debt to see if they’ll remove the collection from your credit report in exchange for payment. To do so, you’ll need to send them a pay-for-delete letter.
