Credit History & Credit Report
- Each owner of a collection account becomes part of the debt's history.
- A bought and sold debt does not have more impact on your credit score.
- Review all three of your credit reports to look for errors.
A debt shows up five times in my credit history, and I want to pay it off. Which collection agent do I pay? Is this an error?
Bad money management and being unemployed caused my credit cards to become delinquent. Since its been years since the accounts became delinquent, the credit cards collection accounts have been sold to collection agencies. The collection accounts show up on my credit report multiple times because the collection agents resell my accounts. I receive letters in the mail with settlement offers that are really good, but I do not know who to pay. What can I do so that I do not have 5 collection agencies for 1 account on my credit report?
Your credit reports contain credit history your lenders share with consumer credit reporting agencies (CRAs) about your debts. The three biggest US CRAs are Equifax, Experian, and TransUnion. Keep in mind that each CRA is independent of the others, and credit history appearing in your credit report at one CRA may be different from what appears at the other two.
Your credit reports are intended to be a history of your debts. That is why when an original creditor, such as a credit card issuer, sells a delinquent account to a collection agent, the debt appears twice on your credit report. This is confusing at first glance, because if an original creditor sells a collection account to Collection Agent A, who later sells the account to Collection Agent B, one debt appears on a credit report (or two credit reports, or all three credit reports) three times.
If you look closely at your credit reports, when an original creditor sells a collection account, the account status will change to something like, "closed" or "assigned." As the collection account is bought and sold by each collection agent, you will see the date each transaction takes place, and the status for the collection account at each collection agent along its journey.
Your wandering collection account may have a long credit history with ownership by a dozen collection agents, but the account makes one impression on your credit score. Credit scoring software, such as FICO or VantageScore, are supposed to recognize the chain of custody for the collection account, and see the account for what it is — one debt you owe. FICO and VantageScore do not penalize a consumer's credit score for a collection account that has been around the block a few times, so to speak, in comparison to an otherwise identical debt still owned by the original creditor. FICO and VantageScore give the same penalty for one-owner and multiple-owner collection accounts, all other things being equal.
The Bills.com Debt Coach will give you no-nonsense advice on your options for resolving your debt problem.
To contact the current owner of your collection account, look at one of your three credit reports and find the debt. Look for the current owner. The account status for the current owner will be something other than "closed" or "assigned." It should be the latest owner.
Collection agents are supposed to report the status of the accounts they own once each month, but some are less diligent about reporting the status of their accounts than they should.
Credit History and the 7-Year Rule
Under federal law, most derogatory information in your credit history must be removed from a consumer's credit report 7 years after the date of first delinquency. (Exceptions to this rule include bankruptcies, federal student loans, and judgments.) If you have a collection account that has passed through several sets of hands, the 7-year clock does not restart when a collection agent buys or sells the account. The 7-year clock starts when the debt become delinquent during the original creditor's ownership of the account. The date the original creditor sells a collection account, or when one collection agent sells the account to another is irrelevant to the 7-year rule.
Get no-cost, no-gimmick copies of your credit reports from AnnualCreditReport.com.
Settling a Collection Account
According to information contained in the annual reports of US big banks, major credit card issuers sell credit card collection accounts to collection agents for about 8 cents on the dollar. A collection agent who buys a collection account from an original creditor has the right to collect the face value of the debt, plus interest if the consumer's state allows it to do so. Keep that 8-cent figure in mind when negotiating a settlement with a collection agent who purchased your collection account.
Start your negotiations at 10 or 15 cents on the dollar for a lump-sum settlement, and proceed upward from there. Or, consider hiring a debt resolution company if negotiating is not your strength.
Get any settlement agreement in writing, and keep records of your payments.
I hope this information helps you Find. Learn & Save.