When Does a Collection Account Go to a Credit Report?

Any account owned by a collection agency is a collection account. Collection agencies buy unpaid consumer debts from creditors at a reduced rate. They then pursue each debtor for the full amount he originally owed. Collection agencies report their accounts to the credit bureaus. As soon as a collection agency reports a debt you owe to the credit bureaus, it appears on your credit reports and damages your credit rating.

Credit Reporting Rights

The Fair Debt Collection Practices Act (FDCPA) contains a specific set of laws that all third-party debt collectors, such as collection agencies, must follow when collecting consumer debts. Collection agencies must first notify you, in writing, that you owe a debt and provide you with 30 days in which to dispute the debt.

Although the FDCPA provides collection agencies with the right to report consumer debts to the credit bureaus immediately, if a consumer takes advantage of her right under the FDCPA to dispute the validity of the debt, the collection agency cannot conduct any form of collection activity before providing the consumer with written proof of the debt.

Delayed Reporting

Just because a collection agency has the legal right to report your unpaid debt to the credit bureaus immediately, does not mean that it will do so. Collection agencies know that informed consumers have little incentive to pay off a debt once a collection account appears on their credit reports. Paid collections are just as damaging to credit scores as unpaid collections. Therefore, some collection agencies promise not to report the debt to the credit bureaus in exchange for prompt payment.

Federal Reporting Period

After reporting your collection account to the credit bureaus, the account appears on your credit report immediately. It does not, however, linger there indefinitely. The Fair Credit Reporting Act (FCRA) limits collection accounts to a reporting period of no longer than seven years. The seven-year period begins 180 days after you ceased making payments to the original creditor. Thus, if the debt itself is older than seven years, a collection agency cannot legally insert the debt on your credit report.

Illegal Reporting Practices

A collection agency can ensure that its collection account appears on your credit report beyond the federal reporting period by changing the dates on the account. This practice is illegal, but does occur. The Federal Trade Commission reserves the right to fine any debt collector that engages in this practice or revoke the company's business license.