The truth about collection accounts and credit reports

By Marrero, Chamizo, Marcer Law, LP,

Florida residents may understand that collections activity on a credit report is not ideal. However, they may not know that such activity may not necessarily stay on their credit report for a full seven years. This may be true if the account in question does not belong to the person who a collection agency is attempting to collect payment from. Under the Fair Credit Reporting Act, people have the right to dispute inaccurate information on their credit report.

Credit bureaus are then required to fix any inaccurate information, and the party that provided the inaccurate data must also work to correct it. If a creditor is using one of the latest credit scoring models such as the FICO 9, collection accounts that are paid or settled won’t impact an individual’s credit score.

The FICO 8 and 9 scoring models won’t even consider a collection account that is less than $100. However, it is important to point out that most creditors still use older scoring models, which means that a collection account may impact an individual’s credit score unless it is removed. In some cases, it may be possible to pay a creditor part of a balance owed in exchange for a request to have the collection account deleted.

Filing for Chapter 7 bankruptcy may be a good way to have credit card, medical or other unsecured debts discharged. It may be possible to have debts discharged without paying creditors any portion of a balance owed. An attorney may be able to tell an individual more about the benefits of filing for bankruptcy such as an automatic stay from creditor collection actions. This may prevent an individual’s wages from being garnished or having accounts seized to pay any past due debt balances owed.