The effect of collection accounts on credit reports
It is not uncommon for lenders in Florida to sell a person’s debt or allow a collection agency to pursue a debt on the lender’s behalf. When debt is sold to a collection agency, the agency will often report this to credit bureaus so that the debt appears on a person’s credit report under the agency’s name.
As with other negative marks, the collection account can remain on a person’s credit report for seven years, although it may be marked as paid if the balance has been paid. The negative effect on a person’s credit score will diminish with time, but people may have to wait for several years for the collection to be removed from their credit report even after it’s been paid.
There are a few exceptions to this. For instance, if a collection was for medical bills and it was later paid by an insurance company, the collection should be removed from a person’s credit report. Additionally, if the debt wasn’t contractually agreed to, such as for library fines, it shouldn’t show up on a credit check.
While many people are able to pay off outstanding debts to creditors or debt collectors with a repayment plan or debt settlement, this isn’t possible for many individuals due to the size of the debt or limited income. However, someone may be able to eliminate their debt by filing for Chapter 13 bankruptcy. Chapter 13 allows people to set up a repayment plan that they can follow, and it may allow a homeowner to stop or prevent a foreclosure. To be able to file for bankruptcy, people must meet certain criteria and follow particular guidelines, and a lawyer could explain the process and what is needed to file.