Collections
CreditGlossary term
Definition
The process by which a third-party agency attempts to recover money owed on a delinquent account that the original creditor has given up trying to collect. Having an account in collections severely damages your credit score and stays on your credit report for seven years from the date of the original delinquency. You have legal rights under the Fair Debt Collection Practices Act regarding how collectors can contact you.
Related terms
- Charge-OffA declaration by a creditor that a debt is unlikely to be collected, typically after 180 days of non-payment, which is then written off as a loss on the creditor's books. A charge-off is one of the most damaging items on your credit report and remains there for seven years. Even after a charge-off, you still legally owe the debt, and the creditor may sell it to a collections agency.
- Settled AccountA debt that has been resolved by paying less than the full amount owed, typically through negotiation with the creditor or collections agency. While settling a debt is better than leaving it unpaid, a settled account on your credit report signals to future lenders that you did not fulfill the original terms of the agreement. Settled accounts remain on your credit report for seven years from the original delinquency date.
- Fair Credit Reporting Act (FCRA)A federal law enacted in 1970 that regulates how consumer credit information is collected, shared, and used by credit bureaus and other entities. The FCRA gives you the right to access your credit report, dispute inaccurate information, and be notified when your credit report is used against you. It also requires credit bureaus to investigate disputes within 30 days and remove information that cannot be verified.
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