Collections Accounts

[difringe]

So, got a dumb question. I'm aware that collections can stay on your credit report for 7 yrs. I was also under the impression that if you do not pay off a collection, it will keep reporting as a fresh collection every month. Does the 7 year reporting period start when the collection is established, or when it's paid off?  If it starts when the collection is established, but is reported as a fresh collection every month if unpaid, then that means that at the 7yr mark, you just gain ~100 points?

[RobertEG]

Neither.

The credit report exclusion period begins on the date of the first delinquency on the debt that is under collection after which the debt remained continuously delinquent up to the collection.  See FCRA 605(c).

The date that a debt collector received collection authority or any first or subsequent reporting by the debt collector of the collection is irrelevant.  

When a debt collector updates reporting of their collection by reporting that it remains unpaid, that is not a "new" or "fresh" collection.

The scoring impact of a collection depends upon how long the debt remained delinquent from the DOFD up to the point is was reported as paid (i.e., converted to a non-delinquency status).

The points "gained" when a collection is ultimately excluded is thus dependent upon its negative impact at that point.

For example, if a collection was paid early on and there were several years of non-delinquent status of the collection once it reached exclusion, the "gain" would be much less than if the debt and collection status remained unpaid up to the point of exclusion.

[difringe]

Thank you very much for your response! Clear and precise as always.

 Edit: A follow-up, if you don't mind. Say you have your collection, you don't pay it, and it goes through the 7 years and is excluded. If the collection agency decided to sell the debt to another collector, that would report as a new collection and start the clock over?

[RobertEG]

No. 

That is precisely what the addition of section 605(c) to the FCRA was intended to prevent. 

The date of first delinquency that must be reported by the debt collector on any collection is the date that the delinquency initially began on the original creditor account, and has thereafter remained delinquent.

If a debt has remained continually delinquent, the DOFD on subsequent collections will be the same as the DOFD reported by the first debt collector.  

If interested in the details of determining and reporting DOFD, then check out the procedure outlined in FCRA 623(a)(5).