Monday, August 18, 2014

Can My Credit Report Have More Than One Collection for the Same Debt?

Which collector should you pay?
Here's a horror story for you: You let a debt fall delinquent and the creditor sells it to a collection agency. Two years later you pull your credit report and discover not one, not two, but three collection accounts on your credit report for the same debt. Needless to say, your credit scores are in the toilet. This may sound farfetched, but multiple collections are a relatively common result of sheer carelessness.

Just as original creditors eventually sell unpaid debt to debt collectors, collection agencies also sell "uncollectable" debts to other debt collectors. The problem debtors often run into is this: debt collectors, like original creditors, often report their company's accounts to the credit bureaus. This results in a collection tradeline appearing on your credit report.

When the collection agency sells the debt, the new collection agency may also report the debt to the credit bureaus. If the previous debt collector doesn't bother to delete its tradeline from your credit report when it sells the account, your credit report will eventually contain several different collections for the same debt.

Multiple Credit Report Entries for the Same Debt Are Against the Law

It's perfectly normal to have two entries on your credit report for the same debt if those entries are the original creditor's account and the resulting collection account. Any further entries for the same debt are prohibited--even if each tradeline contains different account numbers (which they almost inevitably will). This isn't in the interest of protecting you, but rather in the interest of protecting future creditors.

Your credit scores are based on the most accurate portrayal possible of your past financial history. Multiple collections for the same account deal a devastating blow to your credit scores--making you appear to be a much higher lending risk than you actually are. By ensuring that multiple collection accounts can't appear on your credit report for the same debt, federal regulations protect lenders from making judgment errors that could ultimately affect their profit margins.

Prohibiting multiple collection accounts also protects the collection agency's interests. If you see a plethora of collection accounts on your credit report, you'll probably be confused about whom you should pay. This could lead to you paying off an account with a collection agency that no longer owns the debt. Unfortunately, that payment can "vanish" into thin air. The collection agency that actually owns the debt will continue to demand payment and the collector that actually received the payment may conveniently have no record of receiving it. This cheats both the debt's actual owner and the consumer.

How Long Can These Multiple Collections Stay on Your Credit Report?

Federal law restricts collections to only seven years on your credit report. This seven-year clock begins on the date the debt first falls 180 days' delinquent. This generally coincides with the date that the original creditor charges off the debt and sells it to a collection agency.

All the collection accounts that appear on your credit report for the same debt must fall off when the original creditor's tradeline falls off. This means that some collection accounts may only remain on
After 7 years, all collections must come off.
your credit report for a few years---if that. For example, if a debt collector reports a debt six months before the credit reporting period expires, its tradeline won't stick around for a full seven years. In order to comply with the Fair Credit Reporting Act, the company must delete the tradeline in six months.

Is There Any Way to Remove Multiple Collections for the Same Debt?

I plan on making a more in-depth post about this soon and providing a step-by-step guide to help you get rid of any clone collections. For now, however, just know that you aren't stuck with these tradelines forever. The Fair Credit Reporting Act, which governs credit reporting practices in the U.S., provides you with a dispute process.

You aren't limited to only disputing incorrect information. You can also dispute information that is obsolete, such as multiple collections or accounts that appear on your credit report for longer than the credit reporting period allows. You can dispute via mail, over the phone, or even online. Just be sure that you dispute multiple collections as multiples. If your dispute goes into the system as an accuracy complaint, the collection agencies in question are a lot more likely to validate the accounts and they won't get removed.

Long story short, you aren't alone. It's very common for consumers who've had financial difficulty and ended up with several delinquent debts to discover that their credit reports reflect more than one collection account for the same debt. As tempting as it may be to ignore the hassle, removing any additional collections will help you maintain the best credit scores possible until the credit reporting period expires.

Related Posts:

How Much Do Medical Collections Affect Your Credit Score?

Improving Credit Scores After Collections

Removing Re-Aged Collection Accounts From Your Credit Report

Friday, August 15, 2014

Q&A: Can I Open an Account in Another State to Avoid Collector's Bank Levy?

I have a question. I am trying to resolve my credit issues and recently my account was levied by a debt collector. Can I open an account in other State and avoid this levy again.Will they find the bank.How can the collectors get the info.



Unless the collector is collecting a government debt, such as a defaulted student loan or unpaid taxes, the company must have a civil judgment against you before it can levy your bank account. The right and proper way to stop a bank levy is to successfully contest the judgment that created the levy in the first place. You don't mention which state you're in, but state laws vary on how long you have to contest a judgment after its filed.

If you're still within the time frame to contest the judgment, you'll need to have grounds to do so. Once again, acceptable grounds for this will vary by state, but in general you can contest a judgment for the following reasons:

  • The original debt doesn't belong to you
  • You had a death in the family, were hospitalized or have another valid reason for missing court. 
  • You were never notified of the lawsuit (improper service) and therefore couldn't defend yourself
  • Clerical errors in the judgment paperwork
  • The statute of limitations in your state expired before the lawsuit was filed

Of course, getting rid of the judgment isn't always an option. In that case, you have the legal right to open up a new bank account in another state, but there's no guarantee the debt collector isn't going to find it. Out-of-state and online banks are also subject to a collection agency's levy--but only if the debt collector knows where you bank.

Let's say you hypothetically stop using your current bank account and open a new one. It isn't going to take long for the debt collector to realize you've stopped depositing money into your account and have probably switched banks. If the debt collector can figure out where you're banking, it can simply serve the new bank with a writ of execution and levy the new account. If it can't figure out where you bank, it can get the information via a post-judgment interrogatory.

If the debt collector petitions the court for a post-judgment interrogatory, you'll be called back into court and forced to disclose the location of your hidden assets. In this case, they'll simply force you to tell them where you're banking. If you refuse, you could be charged with contempt and possibly even face jail time.

The collection agency could also decide that, if it can't get the money from your bank account, it will get the money by garnishing your paycheck. Unless you live in South Carolina, a debt collector with a judgment has the right to garnish a certain percentage of your paycheck. All the collector needs to know is where you work, and that's a lot easier to figure out than where you bank. Judgment creditors may also have the right to seize other assets, such as investments, and certain forms of property--depending, of course, on your state's judgment enforcement laws.

As far as your question about how collectors get their information goes, they can get information about you a variety of different ways. A post-judgment interrogatory provides the debt collector with whatever information it needs. Your credit report contains valuable information about you, such as your address, Social Security number, whether you're paying other creditors on time and, sometimes, your employer. Collection agencies have also been known to stalk debtor's social media profiles for information. If a collection agency can't find you, federal law says it can call your loved ones and ask for your location.And, of course, who could forget the age-old process of skip-tracing? You'd be surprised how easy it is for a collection agency to gather information about you.

Legally, I am not allowed to tell you how to avoid paying a judgment because I can't give a debtor advice on how to commit fraud. What I can tell you, however, is that a good attorney is worth his/her weight in gold here. Legal help is pricey, but hiring a lawyer is probably a heck of a lot cheaper than continuing to allow the debt collector to levy your bank account.

Hiring an attorney may be beneficial but it isn't a requirement. If you have valid grounds to contest the judgment but can't afford an attorney, you can file a motion with the court on your own. Just make sure that you read up on the legal process and your state's specific rules and procedures. You may also qualify for legal aid, depending on your location and your income.

Oh, one more thing: certain forms of income are exempt from garnishment. If you have exempt income in your bank account, the debt collector may seize it anyway unless you fill out an exemption form from your bank and officially declare the funds exempt. See Funds Exempt from Garnishment for more information on which forms of income are exempt and how to declare your exemptions in order to legally escape your bank levy.

Best of Luck,

Wednesday, August 13, 2014

Q&A: Collection Agency Sent Bills to Wrong Address

Hi Lee,

My name is Melissa and I came across your page form a google search. I am hoping you might be able to provide some guidance. 

In April, I received an email notifying me that there was a change to my credit report. There was a debt from 2010 (an ambulance ride to the ER) that was added. After some digging, turns out the account was sold in July 2010 to the collections agency. The agency is telling me they never received it until March 2011. Initial bills were sent to an address I haven't lived at in years, also had two other addresses on file, places I never lived, nor know anyone that lived or lives there. I have since began the dispute process. 

I am getting statements printed out from my bank from that time to see if there were any payments made to make sure this is in fact an unpaid debt. 

My question: Am I responsible after all this time? This is clearly an error on their part. At the time, I asked the hospital representative if all bills were set up on a payment plan and she verified that they were and I made monthly payments. If this was left off, why did it take 4 years for it to come to my attention? I live in NJ, however I am in the process of moving to NYC. The bill is for something that happened in Florida.

Any insight, recommendations or information would be greatly appreciated. Thank you!



The statute of limitations (which is the amount of time a creditor or debt collector can sue you for a debt) differs by state. In Florida, the statute of limitations is four years. In New Jersey and New York, its six years.

If you lived in Florida until July of 2014, the statute of limitations would expire and you would be free to move to another state without fear of getting sued--even if the new state's statute of limitations is much longer than Florida's.

The problem that arises here is that, if you move before the statute of limitations expires, the SOL is "tolled" in your original state of residence. That means that, as soon as the collection agency discovers that you are no longer living there, the clock on the statute of limitations just stops ticking. When and if you move back, the statute of limitations goes back into effect and begins to time out from where it left off when it was tolled.

If the collection agency was not aware that you moved out of Florida until now (and you didn't give them the date that you moved when you spoke with them) its very possible that the statute of limitations was never tolled and simply timed out on its own. That would mean you're safe no matter which state you move to. If the addresses the collection agency was sending letters to were in Florida and you didn't disclose your new address until after July 2014, you should be safe from a lawsuit.

If, however, the collection agency is aware of the fact that you moved, they can generally opt to go by the SOL in your current state. This is advantageous to the collector, since they'd have until July of 2016 to collect the debt. Now, this part is important, so listen well:

The date that the collection agency originally received the debt is irrelevant. The only date that matters is the date you made your last payment (or, if you never made any payments, the date that your payment was originally due). It makes no difference whatsoever that the collector didn't get its hands on the account until 2011. The SOL and the credit reporting period are calculated using the dates from the original account.

 If a collection agency could use its own dates to determine the statute of limitations and the credit reporting period, no one would ever be free from collection lawsuits and bad debts would hang around on your credit report indefinitely. So don't worry about the date they bought the debt or first reported the debt. It just doesn't matter.

You mention that you are contacting your bank to determine if you made any payments on the debt. Normally making a payment on the debt restarts the statute of limitations from scratch. In Florida, however, you have to provide the creditor with a written promise to pay in order to restart the clock (Just for reference, the same is true in New York). So unless you promised to pay the debt in writing, the SOL was never interrupted and may have timed out in Florida.

The statute of limitations and the credit reporting period are two entirely different things. The credit reporting period begins 180 days after your last payment and lasts for seven years. As I stated above, the date the collection agency bought the debt or originally reported the debt doesn't matter. They have to remove it after the credit reporting period expires. The credit reporting period is the same no matter which state you live in.

Your responsibility for the debt is a gray area. Technically, if you took the ambulance ride and the debt is legitimate, you are responsible for paying the debt no matter how many errors the hospital or collection agency made when trying to collect it.

You said you spoke to a hospital administrator that assured you all bills were set up on a payment plan. If you have that in writing, that gives you grounds to fight this. You'll still be responsible for paying it, but you can probably use that statement to convince the hospital to pull the debt out of collections (and no matter what they tell you, they CAN pull the debt out of collections--even if the account was actually sold and the debt collector isn't working on a contingency) and remove it from your credit report. If all you have is someone's word, you lack proof that this was a legitimate error. It's also possible that the ambulance company bills separately from the hospital itself and that's what caused the issue.

If the ambulance company does not bill separately from the hospital and you have a statement in writing from the hospital noting that all of your debts have been added to a payment plan It could be argued that, if they hadn't made these errors, you would have paid the debt before it ever hit your credit report. In general, however, you aren't absolved from your responsibility to pay a debt simply because you didn't receive a bill.

If the statute of limitations has expired, you are no longer legally responsible for the debt and they can't force you to pay it. Keep in mind that the collection will remain on your credit report regardless of whether you pay the debt or not, and paying a collection account does not improve your credit scores. You do have the right to dispute the debt both with the collection agency itself and the credit bureaus.

If you have the funds to do so, you might consider hiring a consumer law attorney to help you. I don't know the full details of your case, but the original creditor obviously made some blatant billing errors that cost you your good credit rating. A good attorney should be able to help you straighten this out, even if it means filing a lawsuit or two to strong-arm the hospital into taking you seriously and recalling the debt.

One last thing, while you're disputing the collection you should also consider disputing those addresses on your credit report for places you never lived. You don't want another creditor to bill you at one of those addresses only to have this nightmare scenario repeat itself.

Best of Luck

Tuesday, August 12, 2014

Q&A: NCO Re-aged Collection Debt on Credit Report/International Identity Theft


I found your info by googling NCO Collection Agency.

I am a United States citizen living in Canada.  I moved here in Dec. 2002 and would visit home every few months as my parents were both ill and were both deceased in just over three years.  There is a collection account on my credit report that I didn't recognize at first.  I injured myself in the 3rd week of January 2006.  My father died on Jan. 28, 2006 and it honestly slipped my mind.  Quite frankly, it took me until this past April to even remember I had been hurt.  Now, there's this entry that shows NCO "opened" it on Aug. 16, 2007 and a "report" date of May 17, 2009.  To date, I have not been contacted by them. 

I was reading your comment to Lisa dated June 19, 2014 on collectionagencydebt.blogspot where you stated, "If the original default date was more than seven years and 180 days ago this shouldn't be on your credit report at all and you should be able to get it removed as obsolete." and wondered if this also applied in my case. 

Further complicating matters, someone in my hometown has apparently obtained cell phones under my name and social security number and (according to the credit reporting agencies) a mortgage.  It is one of the security questions and when I reply I have "no mortgage", I get an "incorrect answer" and a phone number to call.  My friend is the retired Chief of Police in my hometown and informed me that until I move back home, there is nothing that can be done from here.

Any advice you have to give is appreciated and I thank you for your time.




The seven-year credit reporting period is the same for everyone. so what I told Lisa would also apply to you. Debt collectors generally have to remove their negative tradelines when the original creditor removes its charge-off. Unfortunately, you owe a medical debt, and medical debts don't come with an original creditor. Particularly insidious collection agencies use this to their advantage. The original creditor's report is the yardstick that both you and the credit bureaus can use to determine if a collection is obsolete. Medical debts don't appear on your credit report if they're paid on time, so there is no original account for the debt on your credit report. Without an original creditor account on file, the burden of proof is on you to demonstrate that the collection agency is in error. 

Here's a fun fact for you. The Federal Trade Commission already hit NCO with the largest business fine in history for altering collection accounts dates to ensure they remain on debtors' credit reports far beyond the seven-year limit. The clock on the credit reporting period should start ticking when you stop paying the original creditor--not when the collection agency receives the debt. 

If you dispute this directly with the credit bureaus, NCO will probably verify it as accurate. What you want is some proof that the original debt was incurred in 2006, not 2007. An old medical bill for your injury that notes a late payment and how late the payment is (i.e. 30 days late, 60 days late, etc.) should work just fine. You can also check with your insurance company or the original medical provider for the date of service. The hospital records may not go that far back, but your insurance company might. It can't hurt to try.

Black out any information you don't want to share with NCO on your documents of proof (the details of your injury, for example, are none of their business) and make a photocopy of each item you're using as documentation. Highlight the date. Also print and photocopy the credit report pages from each of your credit reports that reflect the error.

Write NCO a letter stating that the account they are reporting to the credit bureaus is obsolete. Note exactly when you incurred the debt and refer to your medical paperwork as evidence. Point out that you never made any payments on this debt, thus the date of delinquency occurred in 2006, not 2007 and the debt should no longer appear on your credit report. Tell them that re-aging a debt is against the law, and that you have the right to sue (and will exercise this right) if they don't immediately delete this tradeline from your credit report. 

If they don't delete, make photocopies of the same information you sent to NCO and send the proof, along with a letter explaining that this debt is obsolete and must be removed, to each of the credit bureaus whose files reflect the collection. If you want to make absolutely certain that your dispute falls into human hands and doesn't get shuttled into the computer system (the computer system neither acknowledges or analyzes your evidence) write out the letter by hand. Make sure to send both the NCO dispute and all credit bureau disputes via certified mail, return receipt requested. 

I have to wonder though....why does this matter? You're living in Canada. I used to live in Canada. American credit doesn't mean squat over there. Although they have the same credit bureaus, their credit system is based on Social Insurance numbers, not Social Security numbers. You can't pull an American credit report using Canadian credit bureaus. Their system simply isn't set up that way. 

On to the case of identity theft. Identity theft is serious business. Most debts don't follow you to Canada, but if the identity thief racks up enough of it, sooner or later a creditor is going to find you and outsource that debt to a Canadian collection agency which will hunt you down on your home turf in Canada. Don't let this happen. 

You need to file a police report. I think what your policeman friend meant wasn't that you had no course of action to defend yourself but rather you can't fill out an identity theft report with the U.S. police. Go down to your local police station, explain that your identity was stolen and ask to fill out a police report. You can use a Canadian police report the same way you would use an American police report. Use your Canadian police report to file an identity theft complaint with the credit bureaus. 

Make sure to point out that the report was filed in Canada because that it where you're currently living. You don't want the credit bureaus to think that you're a Canadian citizen and dealing with Canadian identity theft concerns yet somehow reported the theft to the wrong bureaus. If that doesn't work (I can't see any reason why it wouldn't unless you keep running into idiots who don't know what they're doing. Believe it or not, the credit bureaus employ scores of these people) Wait until your next trip to the U.S. and fill out a police report about the identity theft there. According to the FTC, you can file a police report either with the police station where you live or the police station where the identity theft occurred. 

You'll also want to place a fraud alert on your American credit reports pronto. The following resource from the Federal Trade Commission should provide you with a detailed guide on exactly what to do when you find out your identity has been stolen: Federal Trade Commission: Identity Theft

I'm going to list some numbers for you to call if you run into problems along the way. 

  • Federal Trade Commission headquarters: (202) 326-2222
  • Experian:  1 (888) 397-3742
  • TransUnion Identity Theft Department: (800) 680-7289
  • Equifax fraud alert: 1-888-766-0008

If you are financially able, consider contacting a consumer law attorney within the U.S. You can do what's necessary to take care of these issues on your own, but its time consuming and extremely stressful. A good consumer law attorney has extensive experience doing this very thing. In addition, collection agencies and credit bureaus alike take lawsuit threats from an attorney much more seriously than lawsuit threats from the debtor. You also have to consider that this person committed a major fraud by purchasing a house in your name. You would retain the right to file a civil suit against the individual and force them to pay for your attorney. 

I cannot stress this enough: Do NOT ignore this. DO NOT. If this person has gotten a mortgage in your name, she knows that you are living out of the country and plans to simply live as you indefinitely. Someone has to bring her to justice. A fraud this significant can carry jail time and, lets face it, this lady belongs behind bars so that she can't turn around and do this very thing to someone else. 

Best of Luck,

Saturday, August 9, 2014

Why Don't Rent Payments Show Up on Your Credit Report?

Rent payments don't usually show up on credit reports.
When it comes to credit reporting, renters get the short end of the stick. This is very ironic when you consider that, if you buy a home, your mortgage becomes of the most important tradelines on your credit report. Your ability to consistently pay your housing debt on time shows lenders that you are financially responsible and a good lending risk. Unfortunately, you can be the most reliable renter on Earth and your credit will remain unaffected because, with few exceptions, rent payments just don't show up on your credit report. 

Why Don't Landlords Report Rent Payments to the Credit Bureaus?

In order for a creditor to report debt on your credit report, it must have a credit reporting contract with the credit bureau. Unless you've been a victim of identity theft, the credit bureaus won't share your information amongst themselves. This means that if a landlord wants your rent payments to appear on all three of your credit reports, the rental company must report the debt to each credit bureau individually. 

The problem that arises here is that, in order to make these reports, the landlord must apply for and be accepted into each credit bureau's reporting program. This isn't as simple as merely paying a fee and installing credit reporting software. Each credit bureau requires an on-site inspection (to ensure that your business actually exists), a monthly membership fee (not cheap, not cheap at all..) and special credit reporting software (also not cheap). 

The up-front costs and regular fees associated with credit reporting are pricey and, when multiplied by three (each credit bureau has its own fees and requirements), can prove too expensive for your average landlord to handle. Unlike banks and credit card companies, apartment complexes and rental companies generally aren't big conglomerates and the high cost of a credit bureau memberships cuts too deeply into their profit margins to be worthwhile. 

Can I Ask My Landlord to Report My Rent Payments to My Credit Report If I Pay the Fee?

I hear this question a lot. You can ask your landlord to report your rent payments to the credit bureaus, sure, but don't expect it to actually happen. A company isn't free to report singular accounts to the credit bureaus for a fee. It's all or nothing. Either your landlord jumps through the hoops of fire that are required to become a full-fledged information provider or not. Without a reporting contract, the landlord can't insert any information on your credit report. 

Note: Experian's RentBureau program is an exception to the rule above. If your landlord participates in the program, he/she can submit the payments you make to RentBureau. A Rentbureau membership is much cheaper than a standard credit bureau reporting membership--making it more accessible for landlords. The best part? Payments submitted to RentBureau appear on your Experian credit report and influence your credit scores. 

Rent Payments Don't Help Build Your Credit Scores, But They Can Destroy Them

As if shelling out a big chunk of your income and not getting credit for it (bad pun, I know) isn't bad enough, if you miss enough rent payments or move out without paying any remaining rent or fees, your landlord can sell the debt to a collection agency or sue you. Most consumers know how damaging a collection account is to their credit rating, and fear is a powerful motivator. Collection agencies have a strong incentive to maintain credit reporting contracts, so if your landlord sends your unpaid rent to collections, your credit scores will take a hit as soon as the debt collector reports your account to the credit bureaus. 

You'll also end up with damaged credit if your landlord decides to file a lawsuit against you to collect unpaid rent and/or fees. Winning the lawsuit nets your landlord a civil judgment which it can then use
You can be sued over unpaid rent.
to garnish your wages and bank accounts, among other things.

Having your wages docked and your bank accounts levied is extremely frustrating, but the longest lasting consequence of the judgment comes in the form of credit damage. Civil judgments appear on your credit report and are just as damaging as a collection--sometimes even more so.

Rent Payments May Appear on Alternative Credit Reports

Your credit files from Experian, Equifax and TransUnion aren't the only credit reports out there. For young people just starting out or those with limited credit histories, alternative credit reports provide lenders with a way of assessing a person's risk when that person lacks a traditional credit report and scores. Examples of items that help establish an alternate credit file include: 

  • Rent payments
  • Insurance payments
  • Utility payments
  • Cell phone payments 
  • Child support payments

In the wake of the recession, many debtors have been left with few options for salvaging their devastated credit scores. If their rent showed up on their credit reports, it could do just that. Rent is just as reliable an indicator of an individual's responsibility level as a mortgage. In recent years, demand has risen significantly for the credit bureaus to include rent payments in credit score calculations. Although your rent payments don't show up on your credit reports right now, the credit bureaus are working to establish programs, such as Experian's "RentBureau", that will take your rent payments into consideration when determining your credit scores.

Related Posts:

How Landlords Pull Your Credit Reports and Scores

Do Apartment Credit Checks Hurt Your Credit Scores?

Tuesday, August 5, 2014

Q&A: Collection Agency Not Updating Credit Report After Debt Settlement

Hello Lee,
I hope you can help me here. I called a collection agency to inquire about a debt I have settled and asked why this was not reported to the credit bureaus and they said they did even if my Equifax still shows it as unpaid. then they asked to talk about another account and I was surprised. It is an old account from 2005 that was not showing on my CR and my first reflex was to say I have no knowledge of this and she kept asking if this was my mine and still said I have no knowledge of it. can they use this to restart the SOL?



Ok, lets address the credit reporting issue first. Federal law requires the collection agency to report changes to your account and requires that the credit bureaus keep these records updated and accurate. All too often something gets lost in translation. I'm going to give you two methods of dealing with this, but I need to first point out that, if you're doing this to improve your credit scores, you're wasting your time. Collection accounts have the same negative impact on your credit scores regardless of whether you've paid them off or not. Although paid collections may illustrate to some lenders that you're making an effort to be responsible, paid collections are just as bad for your actual scores as unpaid ones. 

You have two options here: 

Option #1:
Make a copy of the credit report that shows the collection account as unpaid. Use a permanent marker to black out any identifying information on the credit report (because you never know what information they do or don't have, and you don't want to give them the tools they need to pursue you in the future). You'll also need to make a copy of your proof of payment to the collection agency. I sincerely hope you requested a zero balance letter. If not, provide a copy of the collection agency's written settlement offer and evidence of your payment, such as a cancelled check. 

Write a letter to the collection agency pointing out that your Equifax credit report still shows the debt as being unpaid. Feel free to point out that federal law requires the collection agency to update your tradeline with each credit bureau. Demand that they immediately update your credit records and, if you're feeling squirrelly, threaten to sue.  Oh, and make sure you send your letter via certifed mail, return receipt requested. This forces the collection agency to sign for the letter and prevents them from claiming they never received your dispute. 

Option #2:
Make a copy of the credit report that shows the collection account as unpaid. Make copies of your proof of payment along with a copy of your settlement letter, just as before. This time, however, you're going to write a letter to Equifax disputing the debt. Point out that the collection agency is not abiding by federal law in reporting this account correctly. Refer to the documents you've enclosed and request that Equifax investigate the entry and update it accordingly. 

If both methods fail, you could call and attorney and file a lawsuit. You'd be well within your rights to do so, and it might even be worth it if better credit were the result of all that hassle. The only way these disputes could improve your credit rating would be if the credit bureaus decide to delete the collection agency's tradeline rather than merely correct it. 

Ok, on to the statute of limitations. 

I wish I knew what state you're in, but it shouldn't matter. The odds are on your side that your nine-year old debt is no longer within your state's statute of limitations and the collection agency can't sue you. States have very strict guidelines dictating what does and does not restart the clock on the statute of limitations. Merely having a phone conversation with a debt collector isn't enough to renew the SOL on this debt. Heck, you didn't even admit that you owed it. You're in no danger on that front. Also, the collection agency can't legally reinsert the debt into your credit report, but I'd keep an eye on it just the same if I were you.

Given that you've just settled a debt with a collection agency, you need to know how to protect yourself. I know you didn't ask me about this, but its important that you realize that the collection agency may just turn around and sell the unpaid part of your settlement balance to another collector--letting the nightmare begin anew. Take the settlement offer and your proof of payment and put them away somewhere safe. If you get a call from a new collector in the future, you can use these documents as proof that the debt is no longer viable.

Best of Luck,

Sunday, August 3, 2014

Q&A: Does Agreeing to Pay Collections Restart the SOL?

Hi Lee,

I have two negative reports on my credit report, they are both supposed to fall off in 2 years. I made the mistake of calling both collection agencies, and agreed to make payments in the next couple of months. I can certainly pay them, however, I am worried that paying the full debt may reactivate the 7 year negative credit history. 

Can agreeing to pay the debt restart 7 year negative history? These accounts are so old, I have no record of any paperwork, and no one can seem to tell me the exact date of first delinquency. 

Should I just pay the full debt, have them agree to report to credit bureaus as 'paid in full?' Will this help my score and to have it removed from my report when the 7 yrs is up?

Thanks for any advice you can offer.



You're confusing the statute of limitations for lawsuits with the credit reporting period. The statute of limitations is the amount of time a collection agency has to sue you and the credit reporting period is the amount of time an item can remain on your credit report. These are two entirely different time periods.

Making a payment on a debt that's in collections does NOT restart the 7-year credit reporting period. The clock starts when the debt first becomes 180-days delinquent. Although you may not know when the date of first delinquency occurred, pulling your own credit reports should show you when the negative entries are scheduled to be removed from your credit report. If it were me, I'd pull my credit report right now and print it out. That way, if the collection agency (or any other debt collector that may purchase the debt in the future) decides to "re-age" the debt and reinsert it onto your credit report, you'll have rock solid evidence to provide to the credit bureaus proving that the debt in question is obsolete and should be removed.

Unfortunately, making a payment on your debt does have one very negative effect: It restarts the statute of limitations in most states (in some states you must agree in writing to make a payment before the SOL begins anew). Once the statute of limitations is back in force, the collection agency regains the right to sue you. You don't mention which state you're in (the SOL differs by state) but you did mention the debts are old. Thus, its likely the statute of limitations has already expired.

Agreeing to pay collections--and then following through with that promise--can be a very risky prospect if you're not paying the debt in full all at once. This is because, unless you have a written agreement with the collection agency that says otherwise, the company has the right to file a lawsuit against you as soon as the statute of limitations kicks back into gear--even if you haven't missed a single payment. As it stands, if the SOL has expired, the collection agency's hands are tied. They only get the money if you pay voluntarily.

So don't panic. It's easy to become intimidated by a debt collector and agree to pay a debt when you can't (or shouldn't), just to get off the phone. The good news is that agreeing to pay won't likely hurt you. If you weren't merely intimidated and you genuinely want to take care of your debt, make sure that you secure a solid agreement, in writing, with the collection agency that stipulates the company agrees not to sue you unless you miss a payment.

Wanting to take care of unpaid debts is admirable, but be warned: paying off collections does NOT improve your credit scores. Collection accounts have the same negative impact on your scores whether they're paid in full or you've never paid a dime.

In my opinion, paying this debt is pointless. It doesn't help your credit and the credit reporting period doesn't change. Whether you pay it or whether you don't, it will still remain on your credit report for another two years.

Best of Luck,