Impact of Collection Accounts on Credit Reports
Collection accounts stay on your credit report for seven years from the date the original account went past due. They can hurt your credit during this time, making it more difficult to qualify for new loans or credit cards. If a debt goes to collections and remains unpaid, it may lead to lawsuits, wage garnishments, or liens against your property. It also negatively impacts your credit score.
What Happens After 7 Years?
Once the collection account reaches the seven-year mark, the credit reporting companies should automatically delete it from your credit reports. If left unpaid, debts are often sold by creditors to third-party collection agencies who then attempt recovery of the amount owed. You’ll likely face increased interest rates and could be subject to legal action from collectors. Paying your debts in full is always the best way to go if you have the money.
Impact of Payment on Collection Accounts
Just because you’ve paid a collection account does not mean it will automatically be removed from your credit report. Similar to a Chapter 7 or Chapter 13 bankruptcy filing, a paid collection account will stay on your credit history for up to seven years, even if you ask major credit bureaus to remove it.