How Do Credit Bureaus Work With Debt Collectors?

Collection agencies try many hardball tactics to get you to your debts. They may threaten to ruin your credit by making sure the long past due bill shows up on your credit reports with the Equifax, Experian and TransUnion credit bureaus. They may be able to do this, but only under certain circumstances. You can often fight it if you know exactly how debt collectors actually work with credit bureaus.

Role

The role of the three credit bureaus is to collect financial and demographic information about you with the help of your creditors. It puts this information together to make a credit report that can be purchased by lenders, insurers and even employers. They use it to make decisions about you when you apply for a loan, job or insurance coverage. The information is always up-to-date because the bureaus continually change it based on ongoing reports from your creditors.

Function

The main function of a collection agency is it get money from you to pay off a debt. The agency might be working on behalf of a creditor or it may have purchased the debt for much less than its actual value. It will do whatever it can to get you to pay the money, including notifying the credit bureaus. The debt will show up as a "collection" account, which will bring down your credit score, according to the FICO credit score company.

Time Frame

Most debts, including accounts that have gone to a collection agency, can only appear on your credits for seven years. The bureaus must remove them when that time frame is over, and they will no longer affect your credit score. You can challenge a collection account that still appears after seven years by filing a credit bureau dispute.

Limitations

A debt collector is free to report a collection account to the credit bureaus if it is a legitimate debt. They will then add it to your credit reports. However, you can dispute it and the bureaus are bound by the federal Fair Credit Reporting Act (FCRA) to remove it if it cannot be validated, the Credit Infocenter credit repair website explains. Collection agencies that have purchased a debt from the original creditor often do not have the proper paperwork to validate it. You can file a dispute with the credit bureaus and have a good chance of getting the account removed from your reports. You can sue for damages if the debt collector tries to put it back.

Warning

"Zombie" debt collectors will purchase old debts that are past the statute of limitations for collection in your state, MSN Money Liz Pulliam Weston warns. This means they can no longer take legal action against you to collect the debt, but some will make threats and try to trick you into paying. Unscrupulous collectors will threaten to put the account back on your credit report even though it has dropped off because it is so old. They cannot do this, and you can immediately dispute it if they try. The credit bureaus must remove it under the FCRA, and you may be able to take legal action against the collection agency if it persists.