Home > Managing Debt > Why Kicking Debt Collectors Off of Your Credit Report Just Got Easier

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Deborah is trying to clean up her credit so she can purchase a home. But it’s not proving easy. In particular, three collection accounts are causing major headaches. “One has listed a collections agency no longer in service, One collection agency will not return my calls. (left messages) and one has false info on it,” she writes on the Credit.com blog.

Dealing with collection accounts on your credit reports can sometimes be a long, frustrating process.

But relief is on the way — at least for some consumers. A recent agreement between 31 state attorneys general and the three major credit reporting agencies (CRAs) — Equifax, Experian and TransUnion — will change certain practices related to credit reporting. And when it does, there will be several important changes that may impact consumers who have debt in collections.

The End of Double Jeopardy?

If you don’t pay a collection account, it may wind up with a second — or third — collection agency, resulting in multiple negative items on your credit reports. Sometimes referred to as “double jeopardy,” two or three collection accounts for the same debt can affect your credit scores.

What will change: When collection agencies sell, transfer or no longer manage accounts they must update or delete the account. The agreement requires the CRAs to update their training materials for these companies that report, and make sure they know and follow this requirement.

Who Is That?

Sometimes consumers have found collection accounts listed on their reports but aren’t sure what they are for. Collectors are supposed to report the name of the original creditor but not all do.

What will change: Collection agencies are already supposed to provide the name of the original creditor and a “classification code” that indicates the type of debt (for example, credit card or medical). Under the agreement, the CRAs must make this information mandatory and can reject accounts that don’t meet the standards.

Note that you still won’t see the names of medical providers because doing so may compromise your right to medical privacy; for example, if your credit report showed the name of a substance abuse rehabilitation clinic or a cancer center. “Privacy is the issue here,” says Norm Magnuson vice president of public affairs for the Consumer Data Industry Association. “The collection account is codified so that others who receive the credit report can’t identify the medical facility. The consumer can get the medical facility’s name from the collection agency and/or the credit bureau if they want to validate the debt or don’t know for whom the collection agency is working the debt.”

But I Paid That!

We’ve received complaints from consumers who have paid off, or are making payments toward, collection accounts but their credit reports don’t reflect those payments. From the complaints we received about this issue, it doesn’t seem to be unusual for collectors to fail to update accounts when payments are being made.

What will change: Under the settlement, credit reporting agencies must require collection agencies that report data to “regularly reconcile” information about accounts that haven’t been paid in full. If they don’t? The agreement says, “This regular reconciliation will be accomplished, in part, by periodic removal or suppression of all collection accounts that have not been updated by the Collection Furnisher within the last six months.” In other words, if a consumer has been making payments but the collection agency fails to update the account for at least six months, the account will either have to be removed or “suppressed,” which means it won’t be shown to companies that order the report, and won’t be used to calculate a credit score.

It’s worth noting, though, that unlike other types of credit accounts, making regular payments on a collection account typically doesn’t help your credit scores. Under the most widely used credit scoring models, a collection account is considered negative, regardless of the size of the balance or payments that are being made. Still, there are some credit scoring models that ignore collection accounts where the balance is zero (VantageScore 3 and FICO 9) so it’s helpful to make sure the information that is reported is accurate.

I Had No Idea

A reader recently told us he was contacted by a collection agency out of the blue, trying to collect on a court citation. “I have never received a citation and have contacted the court since I was not the driver of vehicle and live out of state.” Whether is was a toll charged to you via your license plate number, or a parking ticket your son or daughter “forgot” to tell you about, tickets and other bills can sometimes wind up in collections without your knowledge. A survey by Credit.com found that one in 10 consumers who reviewed their credit reports said they found a collection account they weren’t aware of on their reports.

What will change: The agreement prohibits collection agencies from “reporting debt that did not arise from any contract or agreement to pay (including, but not limited to, certain fines, tickets, and other assessments).” Even better, this prohibition is retroactive: the CRAs are supposed to find a way to identify previously reported accounts of these types and remove them.

But…Hold Tight

Like any change of this scale, this won’t happen overnight. Magnuson says these initiatives must be implemented within 6 – 36 months from the effective date of May 20, 2015. In the meantime you still have the right under the federal Fair Credit Reporting Act to dispute information on your credit reports that you believe is incorrect or incomplete. That won’t change.

And neither will the need to review your credit reports and monitor your credit scores on a regular basis for changes. You can get your free annual credit reports from AnnualCreditReport.com, and you can get a free credit report summary including a score every month on Credit.com. After all, you can’t fix a problem you aren’t aware of in the first place.

More on Credit Reports & Credit Scores:

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  • http://www.atlantalawyer.org/ Auden L. Auden L. Grumet, Esq.

    Good stuff!

  • MH

    What if the agency number and contact information is no longer in service. I called them 2weeks ago and when I called again it said the toll free and direct number is disconnected.

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

    Opening a new credit card can slightly hurt your credit scores in the short term. You can read more about that here: https://www.credit.com/credit-reports/what-is-a-hard-inquiry/

  • http://blog.credit.com/author/christine-digangi/ Christine DiGangi

    If you think the account is in error, you can dispute it with the credit reporting agencies. Here’s how: https://www.credit.com/credit-repair/dispute-credit-report-error/ If you actually owe the balance, you might want to start by contacting the original creditor saying you want to pay the bill, and you can try to negotiate removal from your credit reports. Here’s more on that: https://www.credit.com/credit-reports/removing-collection-accounts-from-your-credit-reports/

  • Makisha Jones

    I have a couple of accounts on my reports that are reporting as collection but are still listed as being with the OC. I am confused at to how they can be in collections when they are still listed as the orginal creditor stll has the account. How and can I challenge this?

  • Anonymous

    I have been helping my husband remove medical debt from his account from [redacted] and the Consumer Financial Protection Bureau. I have gotten them to remove $26,000 from TransUnion and $23,000 from Equifax. If you put some effort into it, they budge.

    • Teri Thorp

      thats awesome. i had similar success. you just have to be persistent.

  • Liv

    I have an odd situation that I have been unable to find any information on or similar situations. I am hoping to buy a home next year and started working early to make sure there was no surprises when applying for a mortgage came around. I found GE Capital had charged off and sent an account to collections an account I was sure was paid. All of a sudden I have been getting between 4-8 collection calls from Portfolio Recovery a day. They are also listed on my credit reports. I disputed the original account at all 3 bureaus because the displayed payment amounts were all different on each report and did not add up right.

    All bureaus updated the info…Experian deleted all past account history, Equifax says updated but I see no difference even on close inspection, and Transunion changed the account to paid after collection.

    All of a sudden…the calls from Portfolio Recovery stopped. However, the credit entries from PR have not changed. I am stumped as to what to do next and what usable proof I have to have PR removed from my report or getting Experian and Equifax to change their entries…any help is appreciated.

  • Mary smith

    If I am making payments on a private student loan that charged off but they are still reporting it as late even though I’ve been making payments for the last year, is that sufficient to fall under “but I paid that category”? They have updated the balance but still report it late.

    • http://www.Credit.com/ Gerri Detweiler

      Charge offs can be tricky. They account status is still “charged off” and some lenders continue to report it that way for seven years. But if you brought the loan current and are making payments on time then I would assume you would have grounds to dispute it. You may want to file a complaint with the CFPB or talk with a consumer law attorney.

  • Nicole

    Will these changes effect previous accounts? I was in collections with a hospital and had no idea until it reached a lawyer 2 years later. I paid it off immediately but im curious to know if it will be coded as a medical debt while its still on my credit report.

    • http://www.Credit.com/ Gerri Detweiler

      These particular changes don’t sound like they will help in your situation. That’s one area where I think the settlement fell short.

    • Bethany Williams

      You can put in a note that it be coded as medical debt. What I recommend is filing a complaint with the Consumer Financial Protection Bureau requesting that these debts be listed as MEDICAL. It really does matter. If you don’t get anywhere right away, don’t worry. Just complain again. Eventually they will budge.

  • Flora

    Is it illegal for a creditor to send your account to the courts for garnishment; you pay the garnishment to the full amount the creditor garnished you for. Then almost 2yrs later, that same creditor sends that same account to the courts again for garnishment and says, they didn’t garnish you for the full amount of the accounts debt, that they only garnished you the first time for the amount you were behind. Then that same account is listed on your credit report as a charge off but they are still garnishing your check… Can that be done?? Isn’t that creditor double dipping because once they listed the account as a charge off, the IRS gave them some kind of tax credit?? Meaning they took the tax credit and still garnishing the customer for the remaining balance owed!! Isn’t that ILLEGAL and can it be reported to the IRS to stop garnishment?

    • http://www.Credit.com/ Gerri Detweiler

      It is not illegal for a creditor to write off a debt then try to collect it.

      But if you paid off the full amount and now they are trying to collect more from you, that may be illegal. The IRS isn’t the place to report it. Because it is a matter with the courts you need to talk with a consumer law attorney. You should be able to get a free consultation with one to find out if you have a case. Visit the website of the National Association of Consumer Advocates if you need help finding one.

  • JeffandChristine

    Can you tell me when the new change to credit reporting will go in to effect for medical bills that are paid? My understanding is if they are paid, they are to be removed from your report. Does anyone know?

    • http://blog.credit.com/ Kali Geldis

      Hi JeffandChristine —

      The reform timeline hasn’t been laid out yet, but we’re going to continue following the story as the changes are implemented, so stay tuned!

      • JeffandChristine

        Thank you very much. I don’t know for sure because the information is for my friend but my understanding is the debt was a medical bill that she paid. It looks Like the new changes will have it removed from her report since its paid, is this correct?

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