Do Debt Collectors Report to Credit References?

A credit reference is a bank, credit union or other lender that has loaned you money. The creditors maintain detailed information about your payment history and provide monthly reports to major credit bureaus such as TransUnion, Equifax and Experian. Debt collectors usually report to credit bureaus and not directly to credit references.

Debt Collector Types

Some creditors employ their own debt collectors as part of an in-house collections team. MSN Money reports, that credit card accounts are usually closed and listed as charged off after falling six months behind. Other credit accounts such as auto loans and mortgage loans are closed sooner. Charged off credit cards are initially assigned to internal debt collectors but may later be sold or assigned to an outside firms. Some debt collectors specialize in purchasing old debts for pennies on the dollar.

Negative Information

Debt collectors usually notify credit bureaus about defaulted accounts now listed for collection. The credit bureau then updates the account to show it as a "collection account." Collection accounts are negative credit events and cause credit scores to drop. Some lenders, such as home mortgage companies, refuse to approve credit applications with collection accounts. Approval is possible after removal or payment of collection accounts.

Credit Repair

Credit repair firms advertise that they can remove collection accounts in about a month. However, the Federal Trade Commission reports that the information remains on credit reports for seven years and cannot be removed unless it is outdated or wrong. Damage to credit scores is greatest when the collection account is first added, with the impact diminishing over time. People with multiple collection accounts may find it difficult or impossible to qualify for credit cards and loans at reasonable interest rates.

Pay-for-delete Arrangements

Negotiation sometimes allows for removal of collection accounts from credit reports. The Fair Credit Reporting Act allows creditors and debt collectors to update previously posted credit information or to remove it. Some debt collectors may agree to so-called "pay-for-delete" arrangements allowing removal in exchange for payment in full. However, some creditors and debt collectors have firm rules against this.