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.

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How Should I Pay Off Negative Items on My Credit Report?

Negative items on your credit report vary. From tax liens to defaulted credit cards and collection accounts, all negative items on your credit report damage your credit rating. While paying off your bad debts does not cause the credit bureaus to remove them from your credit record, paid debts look better to prospective creditors than obligations you ignore. Paying off negative items properly benefits your credit score more than simply paying off each account off at random.

Original Creditors First

If your credit report contains negative entries from original creditors, such as a bank or credit card company, pay off the original creditor before you move on to other debts. If you leave the account unpaid for a long enough period of time -- usually six months, but this time period varies by lender -- the lender charges off the debt. Collection agencies purchase charged off accounts. Once a debt collector owns your debt, it will add a subsequent negative notation on your credit file. You can avoid further damage by paying off debts before your creditors send them to collections.

Pay in Full

For an individual trying to pay off old delinquencies, the prospect of a settlement can be tempting. Unless you're dealing with a collection agency, however, don't risk it. While making payments on your delinquent debt does not make it appear more recent in the eyes of the credit scoring formulas, paying only a portion of what you owe leaves a notation on your credit report that the debt was "settled." This updates the negative item in your credit history and lowers your score. If possible, always pay in full.

Negotiate Credit Reporting

Any creditor that can report accounts to the credit bureaus can also amend the information it reports. If you cannot pay your debt in full, try to negotiate the way your creditor reports the account to the credit bureaus.

While not all creditors will do so, some will amend certain aspects of their credit reports in exchange for payment. For example, a credit card company removing a missed payment notation improves your credit rating. Collection agency reports are always detrimental to your scores. If you can convince a collection agency to remove its account from your credit file upon receiving payment, however, your credit score will improve.

How to Pay

Even if you intend to pay off debts you owe, doing so is sometimes difficult -- especially for those living on a fixed income. Each creditor has the right to dictate how it will accept payment, but many would rather grant you a payment plan than not receive payment at all -- saving you from having to save up for a lump-sum payment.

Credit counseling organizations can also help you get out of debt by teaching you more successful debt management techniques and helping your organize a working budget that allows you to meet your daily needs and also pay off your debts over time.

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What Is the Fastest Way to Raise Your FICO Score?

A borrower's credit report is updated once every 30 days with information sent to it by your creditors, however, the credit score is updated each time it is pulled. To quickly increase your credit score, a borrower must comb through his credit report and look for ways to improve his overall credit health. While it can be done, it takes work, follow-through and maybe even an outlay of funds.

Instructions

1

Check your credit report through a free online service, such as AnnualCreditReport.com. You will be required to enter your full legal name, date of birth, Social Security number, address and credit card information to verify your identity. Your credit report will be free once a year, however, to find out your credit score you will have to pay a fee.

2

Check your report for any errors. Report any errors to the credit bureau immediately through the website. The credit bureau has 30 days to respond to your inquiry via email.

3

Note any negative items on your credit report, such as bankruptcies, judgments, collections and liens. If capable, pay any negative items in full. Keep all receipts from these transactions to prove payment if needed to update your credit report.

4

Note your credit utilization. Keep all credit balances less than 30 percent of their limit on credit cards or lines of credit to have the least impact on your score. Paying down these items to this level will quickly raise your credit score.

5

Make sure all payments on all loans are up to date. The best thing you can do to maintain a high credit score is to pay all debts on time.

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Will Transferring Credit Card Debt Affect My Credit Score?

Lenders look at your credit score when determining whether to offer you a loan and how much interest to charge you. If you plan to apply for a loan in the near future, you need to know how transferring credit card debt could affect your prospects.

Significance

Your debt levels account for 30 percent of your credit score, according to the Fair Isaac Corporation. To benefit your credit score, you should keep your debt levels below 30 percent of your available credit on each card, according to Bankrate.com.

Benefits

If you transfer debt evenly across several cards, you could improve you credit score, according to Bankrate.com. For example, if you spread your debt out so each card only had 20 percent of its credit line being used, your credit score would improve.

Warning

If you transfer all of your debt to one card, that card will have a much higher debt-to-available-credit ratio, which will hurt your credit score. Worse, if you close cards you have transferred the balances from, you will have a higher overall debt-to-credit ratio.

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How to Fix Credit Report Errors Online

When you request your free annual credit report, if you find errors, it is important that you contact the credit reporting agency to dispute the errors. Each agency has its own process for filing a dispute that will prompt an investigation into the information provided on your credit report.

Instructions

Fix a Credit Report Error

1

Identify the credit reporting agency that is reporting the error. The three credit reporting agencies, Equifax, Experian and TransUnion, may all have different information on the credit report for their individual agency. Contact the agency that is reporting the error. Check the other agencies' credit reports to ensure that the same error is not repeated on their reports.

2

Visit the agency's website online (see Resources) and follow the procedures online to dispute the item on your credit report. If you do not have a recent credit report, you may need to request a newer credit report before following through with the dispute. It is easier to file the dispute if you have the 10-digit number that should appear at the top of your credit report. This number identifies your credit report so the error can be found and fixed if necessary.

3

Provide the necessary information to the credit reporting agency including your full name, social security number, date of birth and addresses. Provide the agency with the information that appears on the credit report that you are disputing. After providing all information, an investigation will be initiated.

4

Follow up with the agency to ensure that the erroneous information has been fixed. This may take several weeks to occur. If the dispute is filed online, you will have to follow up with the dispute online. If you want to receive written conformation, follow the instructions on the website to file your dispute by mail.

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How to Correct a Foreclosure on Your Credit

A foreclosure has a significant negative impact on a credit score. In some cases, errors can make the situation look even worse. There could be an error in the amount that was reported owed, the date of foreclosure, or how the mortgage was reported to the credit bureau. A mistake on the credit report can show the home was foreclosed when a deed in lieu of foreclosure was completed instead. Even mortgage issues are bound to lower your credit score -- so it's important to take the time to correct false information.

Instructions

1

Obtain your credit report. Under the Fair Credit and Reporting Act, consumers are entitled to a free credit report from all three bureaus. Visit AnnualCreditReport.com to request your copy.

2

Examine all three reports to check for discrepancies. Foreclosures are under the "Public Records" or "Public Information" section of your credit report. View the amount owed and the date of foreclosure. Compare the information on each report pertaining to the foreclosure.

3

Contact the lender to address any concerns and clarify information. If you're unsure about the information reported, call your lender to discuss the foreclosure. Address the issue, and request a correction, if you notice an error.

4

Gather copies of your documentation. Provide proof of the foreclosure error, such as your original mortgage paperwork, letters from your lender, borrower's note, or the lender's waiver of a deficiency judgment.

5

Initiate a dispute with each credit bureau reporting the error. You can file a dispute online, or over the phone, but the FTC recommends mailing a dispute letter to the bureau along with your documentation. The credit bureau will investigate your claim by contacting the lender. Your lender will need to provide their evidence that proves the foreclosure information reported was correct. If the lender doesn't respond within 30 days, or fails to correct the error, it must be removed.

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How to Get a Free Credit Score Without a Credit Card

If you've ever tried to get your credit score for free, you know that there's no such thing as a truly free credit score. You're forced to enter your credit card information and sign up for a free trial of a service, just so you can forget to cancel and get charged for a service you don't want. Though you can get a free credit report easily with no credit card, only one website, Credit Karma, allows you to retrieve your credit score without providing any payment information.

Instructions

1

Log onto Credit Karma at creditkarma.com and click the "Get Started Now" button on the main page. Fill out the registration form, which requires you to enter your name and create a user name. You'll also have to verify your email address and enter your Social Security number.

2

Enter your user name and password to sign into Credit Karma. Click on the "Score Center" tab just below the Credit Karma logo, then click on Update Score. You may be prompted to authorize Credit Karma to pull your credit file from TransUnion before you see your score.

3

Take note of your credit score, which will appear on the next screen. Click on the links above your score history if you'd like to see your auto insurance credit score or your VantageScore, which is a different type of credit score than the traditional FICO score.

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