Ask Lee: Paid Collection Added to Credit Report Years After Payment in Full

Lee,

A collection agency reported for the first time in five years on 08/2013 that I had a paid collection with them. They are claiming it was assigned to them 03/2008 for a medical lab bill for $75.00. They are reporting the status as of 08/2013 - Paid; Date of 1st Delinquency 10/2007; Balance as of 08/2013 - $0 ; Last Payment Date 05/2008. I contacted the credit reporting agency and disputed this claim. The credit reporting agency came back and said that they have check with the collection agency and the debt is valid. What recourse to I have to fight this. I have no other blemishes on my credit. Is this legal?

Thanks!

                                                                                                              ---Anonymous 


Dear Anonymous, 

Collection agencies can, unfortunately, report your account at any time during the seven-year reporting period that begins with the date of first delinquency. Many people pay collections quickly in the hope that they will never be reported only to discover the account reported as "paid" on their credit reports. A paid collection is just as harmful for your credit scores as an unpaid one. 

The good news here is that, if you obtained the collection agency's agreement in writing not to report the debt to the credit bureaus in exchange for immediate payment in full (something everyone should do before paying a collection) you can contact the collection agency and demand that it remove the entry since it is violating its previous agreement. With a written agreement, you could take that one all the way to court if you really wanted to push it. In most cases, however, once the collector sees that you have a written promise from the company not to report, it will pull its report rather than spend the time and resources to defend itself in a courtroom. 

If you didn't get this agreement, you could always contact the collection agency and try to reason with them. After all, this debt was paid off in 2008. The fact that the company didn't report it until now is simply ridiculous. Worst case scenario--this debt remains for another year before it must be removed. The date of first delinquency is 2007. That means the debt cannot remain on your credit report beyond 2014, regardless of when the collection agency first decided to report it. 

I do have more good news to soften the blow. That $75.00 debt isn't going to do the same damage to your credit scores as a debt of $1000.00 or even $100.00 would do. Depending on which version of FICO your future lenders use, it may not impact your score at all. The most recent FICO scoring system does not acknowledge collection debts lower than $100.00 when calculating your credit score. 

Contacting the credit bureaus and disputing the debt in this case isn't likely to do much good. I always recommend that as a last resort since once the credit bureaus verify a debt as valid, they have no obligation to do any further investigating. And, of course, once the credit bureaus verify a debt the collection agency--knowing the consumer has little further recourse--is less likely to try and work things out with you. In your case, you aren't disputing the validity of the debt, only the time frame within which the paid collection showed up on your credit report. The disputing system isn't set up for that. It's either valid or not valid. Black or white. The system, my dear, is broken and has been for quite some time. 

My best advice to you over this paid collection is to contact the collection agency and try to reason with them. Remain calm and civil. If you get someone on the phone who is naturally belligerent  call back and ask for a supervisor. Explain that you paid this collection years ago with the understanding it would not appear on your credit report. For it to do so five years after the fact is purposeless for everyone involved. Paid collections popping up years later is something I see often and I sincerely hope you are able to work this one out. As far as paid collections go, yours is small and will be removed in less than a year, so you're in the best possible position you could be in. 

Best of luck,

Lee