Can Collections & Original Debts Be Reported on Credit?

A credit report consists of a consumer's identifying information, past and present employment information, public record information and credit account listings. Companies who compile the consumer credit report information -- Equifax, Experian and TransUnion -- are responsible for reporting accurate information in accordance with the Fair Credit Reporting Act. Collections and original debts can be listed on credit reports simultaneously as long as the information is correct.

Definitions

If you open a credit account with a lender, such as a credit card company, they are considered the original creditor and the subsequent debt is the original debt. If you default on the account---neglect to pay your bills---the original creditor may assign or sell your account to a collection company. The original creditor may only sell or assign your account to a third party if the original agreement included an assignment clause. Both the original creditor and the collection company can report the account to the credit reporting agencies.

Reporting

Original creditors typically report defaulted accounts as charge-off accounts to the credit reporting agencies. During the average 180-day time frame prior to deeming the account a charge-off, original creditors report the unpaid debt as delinquent. After writing off the account as a charge-off and assigning or selling it, collections companies report the same accounts as collections. Third part collection agencies work on a commission bases for the original creditor, but the account is assigned to them which gives them the right to report the activity. Debt buyers purchase the debt, often for much less than the original debt, which also gives them the right to report the account.

Fees and Timing

The Fair Debt Collections Practices Act gives collection agencies and debt buyers the right to add interest and other fees to the balance of the account listed as a charge-off by the original creditor. The account may be the same, but the amount reported to your credit file can be significantly increased over time. The FCRA stipulates that delinquencies, charge-offs and collections reported by original creditors or collection agencies must be removed from the report after seven years. The consumer's obligation to repay the debt is not extinguished, but the credit reporting agency can no longer list the accounts. The seven-year window begins on the date of the last activity with the original creditor, not when the account was assigned or sold to a third-party collection company.

Conclusion

Original debt and collections accounts may both appear on a credit report, but only if the original creditor had the rights to assign the account, the account information is correct and if the seven-year reporting window is still open. Consumers should take advantage of the free yearly credit report from each reporting agency in order to monitor the accuracy of personal information and negative account listings.