How long do collections stay on your credit report?
By Erica Sandberg
September 5, 2014
Why does a collection fee stay on my report even after I did what they asked? I paid three months ago. I applied for a credit card, and I was denied again based on what they said is on my Experian report. That was the only thing bad on it, so it must have been that. How long do I have to wait for this nightmare to be over? Thank you. –Nicole
I'm afraid the account that's disrupting your sleep could continue to show up a while longer. You see, credit reporting agencies are required by federal law to list correct and timely financial activity. If they don't, the reports aren't worth much to anyone. Lenders and other businesses depend on them (as well as the credit scores that are derived from the listed information) for complete and accurate data about a person's borrowing history. With that, they can make the right decisions.
You did the right thing by paying the debt off — surely it helped your reputation and scores — but it won't erase the fact that the account did land in collections. For now, evidence of that will remain on a credit report for seven years, either from the date you last made a payment or when the debt was sent to a third party collection agency. .
However, this fall, the dominant credit score company, FICO, is unveiling its FICO Score 9 model, which will reward you when you pay off a debt in collections. (It will also not mark medical bills as severely as other debt.) However, it could be a few months before you see a change in your score, so be patient.
Once you find the collection account listed, first check that it's showing a zero balance. By now it should. Then look for the original creditor and the date that it officially charged the debt off. That information should be apparent, but if it's not, you may have to do a little sleuth work. You can contact the original bank or company you did business with to find out, or go through the collection agency and ask when it assumed the debt. It might have passed though a few agencies, but they still need to provide the name of the original creditor and when it went to collections.
If the account is still showing a balance or “fee,” as you stated in your question, you need to contact the collection agency and ask that it report the account as paid to the credit bureaus. If you have no success, you can file a complaint with the Consumer Financial Protection Bureau, which should also help.
In the meantime, be happy. You've already taken the right action and deleted the balance owed.
As for why the credit issuer rejected your application, you could have just jumped the gun. Given the time frame you described, it's likely that you applied before the collection agency had the chance to update the credit reporting agencies, and for those entities to update your reports.
Before you apply for another card, pull your credit report again from either Experian, Equifax or TransUnion from AnnualCreditReport.com. You can pull each of the bureau's reports once a year for free. Space out pulling each bureau's report so you can check over time when that mark has cleared. Once it's gone, you can start applying for a new card again.
Check your credit score at MyFICO.com, and apply for a card within your score's range. Scores from each credit bureau are about $20. Give the credit issuer that rejected you another chance, with your updated reports and higher credit scores. If that bad debt was the only problem, you may qualify!
Got a question for Erica? Send her an email.