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Consumers are often shocked by the amount of information debt collectors have about them — including, sometimes, the amount of available credit on their credit card accounts, or that they recently paid another past-due debt. But how do debt collectors find that out? One way is by checking the debtor’s credit reports, sometimes years after they defaulted on a debt, or before they pick up the phone or send a letter to collect.

Is That Legal?

Debt collectors have the right to review your credit reports, as long as they do so in conjunction with their effort to collect a debt from you.

Specifically, the federal Fair Debt Collection Practices Act says a “consumer report” (the technical name for a “credit report”) may be furnished to someone who “intends to use the information in connection with a credit transaction involving the consumer on whom the information is to be furnished and involving the extension of credit to, or review or collection of an account of, the consumer…” (emphasis added).

“This is pretty much a blanket rule, though it was restated in the April 2012 decision of Pyle v. First National Collection Bureau, a case decided by Magistrate Sheila K. Oberto of the U.S. District Court for the Eastern District of California,” says Jay S. Fleischman, a lawyer who helps people correct errors on their credit reports.” He goes on to explain: “In the Pyle case, the consumer pulled a copy of his credit report and saw that First National Collection Bureau had obtained a copy. The court dismissed his lawsuit against the company because First National was a debt collector, and the presumption was that it had a permissible purpose for accessing Pyle’s credit file. In the absence of proof to the contrary, the court held that First National’s actions were proper under the law.”

How Often Do They Check?

There is no specific limit, but they probably don’t check as often as you think. After all, credit reports cost collectors money. “In general, debt collectors would only pull a credit report once, either at the time they receive the account or at the time they are negotiating repayment options such as a settlement,” says Nick Jarman, president and COO of Delta Outsource Group, and a Credit.com contributor. “The main reason a credit report is checked nowadays is to validate the consumer’s statements to the debt collectors about their current financial situation.”

Unfortunately, these inquiries may be what are known as “hard” inquiries, which affect your credit rating. Generally, though, inquiries only take a few points off scores, and usually don’t count after they are 12 months old. (This guide explains how inquiries affect your credit.)

Can You Stop Them?

Probably not. If you want to stop someone from accessing your credit information, you’ll usually need to place a credit freeze on your reports. But that won’t necessarily stop a debt collector. Equifax notes on its website for example, that “companies that have a current account or relationship with you, and collection agencies acting on behalf of these companies,” are exempt from credit freezes. (Plus, keep in mind that unless you are a victim of identity theft, you’ll usually have to pay a fee to freeze and unfreeze your reports.)

The bottom line? If there are debts you haven’t repaid, there is a good chance a debt collector will review your credit reports at some point. It’s helpful for you to know what they are likely to see, and also to be alerted to inquiries from bill collectors. You can get free annual credit reports and stay on top of changes by getting your free credit scores, updated every 14 days from Credit.com.

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  • Linn

    Hi, first of all I enjoy your blogs, they are very helpful. It is so true about the information they can come up with. My concern is that I have a collection company just start calling me at work, end of last week. After I had said I don’t know what they are talking about, I wouldn’t confirm my last four of ssn, or banking information. Now they have called at least 4 other people in my office to be transferred to me. they have called a couple relatives a few times. So today I called and specially asked that they mail me proof of the debt and also asked for their mailing information or fax number. I got the name of the company, but no address. He said they have many addresses. He said why would I need to send you verification of the debt, when your got the letter from Original debtor, you defrauded them, and why would we want to waste a 48 cent stamp. I said it is a simple request that you mail me the information, and I don’t understand why you won’t give me a mailing address or fax number to your company. He then said, why would you need that we don’t take payments in the mail ? I said that is not why I need your address. He harassed a bit more, saying I defrauded etc. and I just simply asked again for them to mail me something. He concluded that he will inquire and see and in sarcastic tone said something to the effect good luck, and hung up. He didn’t even ask for my mailing address. I left the name of the company out . Do they not have to send it if your request it from them?
    Thank you!

  • DesperateInLA

    Hi Gerri,

    I hope you can help me with my problem. I looked at your site and found advice for people who had never received a bill, or simply failed to pay their bill in a timely way, and had their bill turned over to a collection agency. However I couldn’t find advice for my particular situation, which is that I just received notice from collections that my healthcare provider submitted a debt for a bill I paid months ago. It’s the healthcare provider’s mistake. I am especially anxious because I am actively seeking a mortgage for my first house and my credit is excellent. If (when?) this is reported to credit bureaus, I could lose a house!

    I have written a letter to dispute the debt with the collection agency and will send it certified mail first thing in the morning. I have a few questions about the next steps:

    1 – How do I get the health care provider to take the debt back from the collection agency and remove the account? I have proof that the bill was paid (my credit card statement reflects this and I took a screenshot of their online billing page that shows the amount as paid). Do I need to get an admission of their mistake in writing?

    2 – How do I prevent the collection agency and/or the health care provider from reporting this to credit bureaus? Does disputing the debt mean that they can’t report it until it’s resolved? Or could my healthcare provider’s mistake actually cost me a house?

    3 – Do I have any recourse if the collection agency’s hard inquiries bring my credit score down and cost me a good mortgage rate?

    This seems terribly unfair and has happened at the worst possible time. Hoping you have some advice…

    • http://www.credit.com/ Credit.com Credit Experts

      First, a dispute itself can cause a problem with getting a mortgage, so the dispute is ill-timed. However, there’s not much you can do about that. When you dispute, send a copy of the documentation that the bill was paid. That should result in the collection account being removed from your credit report.

      Disputing a debt does not mean it cannot be reported.

      A collection agency’s inquiries are not hard, and they won’t bring your score down. But the existence of a collection account has a major effect.

      Here’s a post about disputes and homebuying: How a Credit Report Dispute Could Stop You From Buying a Home

      We wish we had better news. But finally, yes, if delays, etc., result in financial harm, you can talk to a consumer law attorney about suing for damages.

      • DesperateInLA

        Thank you!

        • http://www.credit.com/ Credit.com Credit Experts

          You are most welcome.

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