If there is one thing that confuses people more than anything else about their collection accounts, its that they get the credit reporting period mixed up with the statute of limitations.
I've written several posts on statutes of limitations, but to make things simple, here's the difference between the two:
1. Statute of Limitations – The statute of limitations refers to how long a given creditor has to sue you. Every state has a different statute of limitations. This length of time does not in any way, shape or form impact your credit report (unless you get a judgment, but that's a whole 'nother can of worms).
2. Credit reporting period – This is the amount of time that a given entry can remain on your credit report. The credit reporting period for most items is mandated by the Fair Credit Reporting Act and are a matter of federal law. Regardless of where you live, the credit reporting period for a collection account is seven years.
Paying Debt Collectors Doesn't Reset the Credit Reporting Period.
Every time you make a payment to a collection agency, you're resetting the statute of limitations and giving them extra time to sue you in the event you stop making payments. What fun. You could submit a payment to a collection agency every day, however, and it wouldn't change the amount of time the collection agency had to bring legal action against you. As a matter of fact, some people end up paying zombie debts and are paying on collection accounts long after they legally need to – especially when the collection agency couldn't even hurt their credit!
Collection Agencies Can't Reinsert Obsolete Accounts
No matter what a debt collector says to you on the telephone about reporting your debt to the credit bureaus, if that debt is older than 7 years and 180 days, its illegal to so much as touch your credit files.
The credit reporting period for a bad debt starts 180 days after you make the last payment on the account. This is the same date used to determine the statute of limitations on bad debts. The major different between the two is that, while you have the power to turn back the clock on the statute of limitations, nobody can do a damn thing about the credit reporting period. It's set in stone.
|This may as well be quoting the credit reporting period...|
...because you can't change it.
That's not to say that debt collectors don't try. They do. Collection agencies are notorious for changing the age of debts just so they'll hang around on a debtor's credit report a little bit longer and maybe net an extra payment for the company. Of course, by the time a collection account is obsolete and a collection agency feels the need to reage it, the statute of limitations has usually passed. Thus, the incentive for reaging is usually filing a lawsuit (or threatening to file one, since technically a collection agency can't legally make threats its unable to carry out). At that point, your debt likely sits with a junk debt buyer rather than a real collection agency and the junk debt buyer would love nothing more than a default judgment.
So that's the skinny, more or less. Don't let the debt collectors fool you. once the credit reporting period expires on your debt, its game over for the collection account within your file.