How Do Collections Accounts Affect Your Credit?

Collections have a negative effect on your credit score. If you fail to pay back your creditor or lender or miss out on instalments regularly, they may resort to a debt collection agency or sell your account to a debt buyer. However, they most likely will call you or send emails to inform you about selling your account to a debt buyer. Then, the debt collection agency will pursue you to recover the money from you, and you are legally obliged to make the payment. In fact, once the lender has hired a debt collection agency, you will make payment directly to the agency instead of the original creditor. 

What is the difference between a collection account and a charge-off account?

A collection account and a charge-off are two different things. A collection account is a debt turned over to a third-party debt collector or a debt collection agency because the borrower has failed to pay it as agreed. Collection accounts can be reported on credit reports and harm your credit score. 

On the other hand, a charge-off is a debt that a creditor has written off as a loss because the borrower has not paid the debt for an extended period. Charge-offs are typically reported on credit reports as ‘charge-offs’ or ‘charged-off’. Like collection accounts, charge-offs can also harm a person’s credit score. However, a charge-off is generally considered a more serious negative mark on a credit report. 

How do collection accounts affect credit scores?

Credit scores are used by lenders, landlords, and other businesses to evaluate your creditworthiness or your ability to pay back debts and manage credit responsibly. Credit scores are based on credit reports compiled by credit reporting agencies. 

Collection accounts are considered to be negative marks on credit reports because they indicate that you have failed to pay a debt as agreed and that the creditor has had to turn the debt over to a third-party debt collector to recover the money. 

For how long can collection accounts feature on my credit reports?

Collection accounts can remain on your credit reports for a maximum of seven years from the day of the original delinquency or the day you first missed a payment on the debt. It is known as the credit reporting time limit. After seven years, the collection account should automatically be removed from your credit reports unless the creditor has obtained a judgement against you in court, in which case the judgement can remain on your credit reports for up to seven years or till the bill of limitations has become invalid, whichever is longer. 

About Us

Taurus Collections (UK) Ltd. can be your one-stop destination if you want to successfully boost your odds of collecting debts. Use our  Late Payment Calculator to calculate your outstanding credit amount. We help our clients with certain debt collection services that include:

For more details, call us at 0800 069 8777 or 01332 565 350 (Derby). Send your concerns to Connect on Facebook, Instagram, and Twitter.