Can Collection Centers be Authorized to Run a Credit Check on You?

When you fail to pay a debt as agreed, your creditor may refer your delinquent account to a collection agency, a business that seeks to convince individuals to pay back past-due debts. A collection agency can use myriad tactics to convince you to pay up, including sending numerous phone calls and letters, tacking on fees and even suing you in a court of law. Additionally, collection agencies can check your credit report. While checking the report won't affect your score, what else an agency will do to the report surely will affect it.

Background

The Fair Credit Reporting Act, or FCRA, allows collection agencies to run a credit check on you, according to an article from SpendOnLife, a consumer finance informational resource. These companies can view the information on your credit file, including your name, address, employer, current credit accounts and any existing delinquent items, such as collection accounts, late payments or maxed-out credit cards.

Effect on Your Credit Score

When a collection agency checks your credit report, it performs what is known as a "soft inquiry." Unlike the "hard inquiries" that credit card companies and lenders use to check your credit report, soft inquiries do not affect your credit score, which is the three-digit figure that determines whether or not you qualify for loans. However, a collection agency will amend your credit report to add information on the past-due debt you owe. This will adversely impact your credit score.

Additional Effects

In addition to the impact on your credit rating, a collection agency getting hold of your credit report can lead to more misery. Because your employer shows up on your credit report, a collection agency can find your company's number and contact you at work -- unless your employer informs the agency that it cannot. Also, a collection agency can continue to check your credit report every month, updating your delinquent account's information.

Time Frame

The negative information collection agencies post to your account will not go away in a short period of time. In fact, collection account information will stay on your credit file for seven years. In addition to holding down your credit score, collection information may prevent you from gaining access to credit cards or other types of consumer credit.