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Can Debt Collectors Report to Credit Bureaus?
by
JG Wentworth
•
October 29, 2024
•
7 min
If you’re dealing with debt, you might be wondering about the relationship between debt collectors and credit bureaus. More specifically, can debt collectors report your debts to credit bureaus? How does this affect your credit score? What rights do you have? This article will answer these questions and more, helping you navigate the complex world of debt collection and credit reporting so that you can get a better handle on your finances.
Debt collectors, defined
Debt collectors are individuals or companies that specialize in collecting unpaid debts. They may be:
- Original creditors (the company you originally owed the debt to)
- Third-party collection agencies hired by the original creditor
- Debt buyers who purchase unpaid debts from creditors
Credit bureaus, defined
Credit bureaus, also known as credit reporting agencies, are companies that collect and maintain consumer credit information. The three major credit bureaus in the United States are:
These bureaus use the information they collect to create credit reports, which lenders and other businesses use to assess your creditworthiness.
Can debt collectors report to credit bureaus?
The short answer is yes, debt collectors can report your debts to credit bureaus. However, there are rules and limitations they must follow. Debt collectors can only report your debt to credit bureaus if:
- The debt is legitimate and you actually owe it.
- The debt collector has verified the debt.
- The debt is within the statute of limitations for credit reporting.
It’s important to note that debt collectors are not required to report to credit bureaus. Some may choose not to report, especially if the debt is small or if reporting would be too costly for them.
Limitations on reporting
While debt collectors can report to credit bureaus, they must follow certain rules:
- Fair Credit Reporting Act (FCRA): Debt collectors must comply with the FCRA, which regulates how consumer credit information is collected, disseminated, and used.
- Accurate information: The information reported must be accurate, complete, and up-to-date.
- Time limits: Most negative information, including collection accounts, can only remain on your credit report for seven years from the date of first delinquency.
- Dispute resolution: If you dispute a debt, the collector must note that the debt is disputed when reporting to credit bureaus.
How debt collection affects your credit score
When a debt collector reports to credit bureaus, it can significantly impact your credit score. Here’s how:
- Negative mark: A collection account is a serious negative mark on your credit report. It indicates that you’ve failed to pay a debt as agreed.
- Long-lasting impact: Collection accounts can remain on your credit report for up to seven years, even if you eventually pay the debt.
- Credit score drop: The presence of a collection account can cause your credit score to drop significantly, often by 100 points or more.
- Multiple impacts: If you have multiple debts in collections, each one can be reported separately, potentially causing multiple drops in your credit score.
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Your rights when dealing with debt collectors
As a consumer, you have rights when it comes to debt collection and credit reporting. The Fair Debt Collection Practices Act (FDCPA) and the Fair Credit Reporting Act (FCRA) provide important protections:- Debt verification: You have the right to request debt verification within 30 days of first being contacted by a debt collector. They must provide proof that you owe the debt.
- Dispute inaccuracies: If you believe a debt is inaccurately reported, you have the right to dispute it with both the debt collector and the credit bureaus.
- Cease communication: You can request that a debt collector stop contacting you. They must comply, although they can still take legal action to collect the debt.
- No harassment: Debt collectors cannot harass, oppress, or abuse you. This includes threats, obscene language, or excessive phone calls.
- Truthful information: Debt collectors must be truthful about who they are and the amount you owe. They cannot misrepresent themselves or the debt.
- Privacy: Debt collectors cannot discuss your debt with anyone other than you, your spouse, or your attorney without your permission.
Steps to take if your collector reports to credit bureaus
If a debt collector has reported your debt to credit bureaus, here are some steps you can take:- Request debt verification: If you haven’t already, request that the debt collector verify the debt. They must provide proof that you owe the debt and that they have the right to collect it.
- Check your credit reports: Check credit reports to find all active debt that is assigned to you.
- Dispute inaccuracies: If you find any inaccurate information, dispute it with both the credit bureaus and the debt collector. You can do this online, by phone, or by mail.
- Consider paying the debt: If the debt is valid, consider paying it or negotiating a settlement. While this won’t remove the collection account from your credit report, it may look better to future lenders.
- Request goodwill deletion: If you’ve paid the debt, you can try asking the debt collector to remove the account from your credit report as a goodwill gesture. They’re not obligated to do this, but some may agree.
- Wait it out: If all else fails, remember that collection accounts will automatically fall off your credit report after seven years.
Strategies to improve your credit after collections
Having a collection account on your credit report can be discouraging, but there are steps you can take to improve your credit:- Pay your bills on time: Payment history is the most important factor in your credit score. Make all your payments on time going forward.
- Reduce credit card balances: High credit utilization can hurt your score. Try to keep your credit card balances below 30% of your credit limits.
- Don’t close old accounts: The length of your credit history matters. Keep old accounts open, even if you’re not using them.
- Avoid new hard inquiries: Each time you apply for credit, it can cause a small, temporary drop in your score. Limit new credit applications.
- Consider a secured credit card: If you’re having trouble getting approved for credit, a secured card can help you rebuild your credit history.
- Be patient: Improving your credit takes time. Focus on developing good financial habits, and your score will gradually improve.
The bottom line
While debt collectors can report to credit bureaus, they must follow specific rules and regulations. Understanding your rights and the impact of collections on your credit can help you navigate this challenging situation. Remember, no matter how difficult your current financial situation may seem, there are always steps you can take to improve your credit and financial health. If you’re feeling overwhelmed, consider seeking help from a credit counselor or financial advisor who can provide personalized guidance based on your specific situation.There’s always JG Wentworth…
Do you have $10,000 or more in unsecured debt? If so, 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
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The 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.
* 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 51% 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.
JG Wentworth does not pay or assume any debts or provide legal, financial, tax advice, or credit repair services. You should consult with independent professionals for such advice or services. Please consult with a bankruptcy attorney for information on bankruptcy.