If you fall too far behind on repaying a debt, a creditor can consider you in default and turn the account over to a debt collection agency. Once your account is reported to the credit bureaus as being in collection, that negative information normally sticks to your credit history for seven years after the original default date.
Debt Collection and Credit Reports
Collection agencies aren't required to make a report, although they normally do. There is no waiting period before a debt collector can report you to the credit bureaus. A collection agency will contact you after a creditor sells or transfers an account. Typically, collection agencies have already reported to the credit bureaus by the time you hear anything. Your credit report will show two accounts for the debt. The original account will be listed as inactive. The second account shows that the debt was sent to a collection agency.
According to Kiplinger.com, the FICO credit score software used by the three major credit bureaus was changed in 2009. Since that time, a debt reported by a collection agency of less than $100 is ignored when credit scores are calculated. A collection agency may still report such amounts, but this won't hurt your credit score if it does. Another change to the FICO system in 2014 counts unpaid medical bills sent for collection less than other kins of debt. Again, these collection reports will stay on your credit history for seven years -- they just do less harm to your credit rating. However, some lenders may calculate credit scores using earlier versions of the FICO software or another credit scoring system. These lenders may assign you a lower score than the credit bureaus as a result.
What You Can Do
Check your credit reports at least once a year. You can do this for free at AnnualCreditReport.com, the provider authorized by law to make free reports available to the public. If you find an erroneous collection report, you can file a dispute with the credit bureau to correct the information. If the report is accurate, contact the collection agency. You cannot remove the negative information, but the collection agency can. You'll likely have to negotiate and agree to more stringent repayment terms in exchange for getting a collection removed. There's no guarantee a collection agency will agree to remove collections from your credit record, but it can't hurt to try.