On this page

What's next

Stopping debt collectors
Debt Resolution

Jul 26, 2024

6 min

What is the 11-Word Phrase to Stop Debt Collectors?

man breaking piggy bank
Annuity Purchasing

Apr 3, 2024

5 min

When Should I Start Taking Money Out of My Annuity?

man with phone and credit card
Debt Resolution

Mar 20, 2024

5 min

Can I Still Use My Credit Card after Debt Consolidation?

Judge Dismissing Debt Lawsuit
Debt Resolution

Nov 6, 2023

8 min

How to Get a Debt Lawsuit Dismissed

Earn a high-yield savings rate with JG Wentworth Debt Relief

Can a Debt Collector Affect Your Credit Score?

by

JG Wentworth

February 17, 2025

5 min

People Using Laptop and Credit Score Concept on Table

When a debt goes into collections, it can significantly impact your credit score and remain on your credit report for up to seven years. Understanding how collection accounts affect your credit and knowing your rights can help you manage and minimize their impact. Let’s take a look at the various ways debt collectors can influence your credit score and provides strategies to protect your financial health…

Initial credit score drop

When a debt is transferred to collections, the original creditor typically reports the account as a charge-off, and the collection agency creates a new collection account. Both these events can severely damage your credit score, potentially causing:

  • An immediate drop of 50-100 points or more.
  • A significant negative impact on your payment history, which accounts for 35% of your FICO score.
  • Reduced creditworthiness in the eyes of future lenders.

Multiple collection entries

Your credit score can be affected multiple times for the same debt if:

  • The original creditor reports the charge-off.
  • The first collection agency reports the collection account.
  • The debt is sold to subsequent collection agencies, each potentially creating new entries.

Duration of impact

Collection accounts generally stay on your credit report for seven years from the date of first delinquency, regardless of whether you pay them or not. However, newer credit scoring models like FICO 9 and VantageScore 4.0 ignore paid collection accounts, potentially lessening their long-term impact.

Prevention strategies

There are several ways in which you can help avoid or mitigate having your credit score impacted negatively by debt collection:

1. Communicate early with creditors

  • Contact creditors immediately if you’re having trouble making payments.
  • Request hardship programs or payment plans before accounts go to collections.
  • Document all communication attempts and agreements in writing.

2. Know your rights

The Fair Debt Collection Practices Act (FDCPA) provides important protections:

  • Right to dispute the debt within 30 days of first contact.
  • Right to request debt verification.
  • Protection from harassment and unfair collection practices.

3. Monitor your credit reports

  • Check your credit reports regularly.
  • Dispute any inaccurate information promptly.
  • Watch for unauthorized collection accounts that might indicate identity theft.

4. Debt validation

Before making any payments:

  • Request debt validation letters from collectors.
  • Verify the debt is yours and the amount is correct.
  • Ensure the collector has legal authority to collect.

5. Pay for delete

  • Request a “pay for delete” agreement in writing.
  • Offer to pay the full amount in exchange for complete removal from credit reports.
  • Get any agreements in writing before making payments.

6. Debt settlement

  • Negotiate to pay less than the full amount.
  • Request removal of the collection account as part of the settlement.
  • Get settlement agreements in writing, including credit reporting terms.

7. Goodwill deletion

If you’ve paid the collection account:

  • Write a goodwill letter explaining any extenuating circumstances.
  • Request removal of the negative mark as a courtesy.
  • Include documentation of your current good payment history.

8. Dispute inaccurate information

Under the Fair Credit Reporting Act:

  • Challenge any inaccurate information on your credit reports.
  • Dispute outdated accounts that should have aged off.
  • Contest duplicate entries for the same debt.

Start Your Free Debt Relief Consultation

Take your next step towards being debt-free

"*" indicates required fields

Step 1 of 4 - Debt Amount

Choose your debt amount

$10,000 $100,000+

Special considerations

If you qualify for any of the following circumstances, you may be eligible to have your credit score protected from debt collection:

Medical collections

As of July 2022:

Time-barred debts

  • Know your state’s statute of limitations on debt collection.
  • Understand that making a payment can restart the statute of limitations.
  • Consider whether paying old debts is in your best interest.

Building credit after collections

If your credit score ends up being negatively impacted by debt collection, here are a few ways you can repair it over time:

1. Focus on current accounts

  • Make all current payments on time.
  • Keep credit utilization low on existing accounts.
  • Consider secured credit cards to rebuild credit.

2. Add positive credit history

  • Become an authorized user on a responsible person’s credit card.
  • Use services that report rent payments to credit bureaus.
  • Consider credit-builder loans from credit unions.

3. Long-term strategy

  • Create a budget to prevent future collections.
  • Build an emergency fund for unexpected expenses.
  • Regularly monitor your credit reports and scores.

The bottom line

While debt collections can significantly impact your credit score, understanding your rights and options can help you minimize the damage. Focus on preventing accounts from going to collections when possible, and take prompt action to address collection accounts when they appear. Remember that time, combined with positive credit behaviors, will gradually improve your credit score even if collection accounts remain on your report.

Remember to consult with a qualified financial advisor or credit counselor for advice specific to your situation, as individual circumstances can greatly affect the best approach to handling collection accounts.

There’s always JG Wentworth…

If you have $10,000 or more in unsecured debt there’s a good chance you’ll qualify for the JG Wentworth Debt Relief Program.* Some of our program perks include:

  • One monthly program payment 
  • We negotiate on your behalf 
  • Average debt resolution in as little as 48-60 months 
  • We only get paid when we settle your debt  

If you think you qualify for our program, give us a call today so we can go over the best options for your specific financial needs. Why go it alone when you can have a dedicated team on your side?

Recommended reading for you

Stopping debt collectors
Debt Resolution

Jul 26, 2024

6 min

What is the 11-Word Phrase to Stop Debt Collectors?

Sounds like magic, right? Thankfully, there’s no spell required. In this blog, we'll explore this phrase, its origins, how to use it, and what it means for your rights as a consumer....
man breaking piggy bank
Annuity Purchasing

Apr 3, 2024

5 min

When Should I Start Taking Money Out of My Annuity?

Discover expert advice on when to start taking money out of your annuity with JG Wentworth. Learn about the best strategies for maximizing your retirement income and making informed financial decisions. Visit our page for...
man with phone and credit card
Debt Resolution

Mar 20, 2024

5 min

Can I Still Use My Credit Card after Debt Consolidation?

Can you use your credit card after debt consolidation? Learn about the implications, benefits, and strategies for responsible credit card use post-consolidation to maintain financial health....
Judge Dismissing Debt Lawsuit
Debt Resolution

Nov 6, 2023

8 min

How to Get a Debt Lawsuit Dismissed

You have legal rights and options to defend yourself should you end up in this situation. In this blog, we’ll go over some of the most effective strategies to have your debt lawsuit dismissed....

* Program length varies depending on individual situation. Programs are between 24 and 60 months in length. Clients who are able to stay with the program and get all their debt settled realize approximate savings of 43% before our 25% program fee. This is a Debt resolution program provided by JGW Debt Settlement, LLC (“JGW” of “Us”)). JGW offers this program in the following states: AL, AK, AZ, AR, CA, CO, FL, ID, IN, IA, KY, LA, MD, MA, MI, MS, MO, MT, NE, NM, NV, NY, NC, OK, PA, SD, TN, TX, UT, VA, DC, and WI. If a consumer residing in CT, GA, HI, IL, KS, ME, NH, NJ, OH, RI, SC and VT contacts Us we may connect them with a law firm that provides debt resolution services in their state. JGW is licensed/registered to provide debt resolution services in states where licensing/registration is required.

Debt resolution program results will vary by individual situation. As such, debt resolution services are not appropriate for everyone. Not all debts are eligible for enrollment. Not all individuals who enroll complete our program for various reasons, including their ability to save sufficient funds. Savings resulting from successful negotiations may result in tax consequences, please consult with a tax professional regarding these consequences. The use of the debt settlement services and the failure to make payments to creditors: (1) Will likely adversely affect your creditworthiness (credit rating/credit score) and make it harder to obtain credit; (2) May result in your being subject to collections or being sued by creditors or debt collectors; and (3) May increase the amount of money you owe due to the accrual of fees and interest by creditors or debt collectors. Failure to pay your monthly bills in a timely manner will result in increased balances and will harm your credit rating. Not all creditors will agree to reduce principal balance, and they may pursue collection, including lawsuits. JGW’s fees are calculated based on a percentage of the debt enrolled in the program. Read and understand the program agreement prior to enrollment.

This information is provided for educational and informational purposes only. Such information or materials do not constitute and are not intended to provide legal, accounting, or tax advice and should not be relied on in that respect. We suggest that you consult an attorney, accountant, and/or financial advisor to answer any financial or legal questions.