How Collections Affect Your Credit Score and What You Can Do About It

There aren’t many things you can do to lose 100 points from your credit scores, but having an account go to collections is one of them.

When you fall behind on a debt payment or a bill, and the account gets sent to collections, your credit scores will most likely take a big hit. It may take 30 days or more for the account to show up on your credit reports, but after that, you can expect to see your credit scores drop by 50 points, 100 points or even more.

Will your credit be ruined forever? Definitely not! No matter how bad the damage is, there are always ways to regain points. Below, we’ll share some tips for dealing with collections debt and how to rebuild your credit afterwards.

What Are Collections and How Do They Work?

If you have a debt in collections, it means you had an overdue bill or debt that was either transferred to a special department to collect the money (first-party collections), or it was sold to a debt collection agency (third-party collections).

Regardless of the type of account or bill, it will typically go into collections when the payment is 180 days (six months) overdue.

There are many different types of accounts and charges that can go to collections if they’re unpaid, including:

• Credit cards
• Loans
• Utility bills
• Rent
• Medical debt
• Parking tickets

How Much Do Collections Affect Your Credit Scores?

Collection accounts can wreak havoc on your credit scores. That’s because they impact the main factor that’s used to calculate your credit scores: your payment history. When a debt goes to collections, it shows that you have a recent history of missed payments.

How many points do you lose when an account goes to collections? It could be anywhere from zero to 100 points or more. It’s impossible to predict the exact number, since it depends on a few different factors, but it’s safe to say that the damage will be closer to 100 points than zero.

Here’s a look at what the contributing factors are:

• Bureau reporting: The original company that owned the account will choose whether or not to report the information to the credit bureaus. The same goes for collection agencies that buy debt. If neither one reports the information, your credit scores will not be impacted.
• Collecting party: An overdue account can have a more negative impact if it’s transferred to an internal department for collections (also known as first-party collections) than if it’s sold to a collection agency (a third-party collector).
• Type of debt: For medical debt, it won’t impact your credit scores if it’s under $500 or if you pay off the full balance.
• Amount owed: Larger balances will have the most negative impact, but the debt won’t impact certain versions of your credit scores at all if it’s less than $100.
• Debt age: The more recent a collection account is, the more impact it will have on your scores.

How Long Do Collections Stay on Your Credit Reports?

Like most negative marks, collections accounts stay on your credit reports for seven years. Thanks to the Fair Credit Reporting Act (FCRA), marks like missed payments and collection accounts have to be removed after that period.

When does the seven-year timeline begin? Sometimes this part can be difficult to determine. According to FICO, it starts with the most recent month the payment was overdue without being brought current again.

So, let’s say you had a credit card you fell behind on 10 years ago, then you caught up on payments for a while, but you stopped paying all together in January of 2020. In this case, the collection account would remain on your credit reports until January 2027.

If you’d rather not have to guess about the timeline, you can look at your credit reports for confirmation. For each collection account, you will either see a “drop-off” date, or you can look for the “original delinquency” date and add seven years.

Does Paying Off Collections Improve Your Credit Scores?

Paying off or settling collection debt won’t necessarily improve your credit scores, and it won’t remove the accounts from your credit reports either.

There are many different credit score calculators that can be used to generate your credit scores, and unfortunately, most of them treat paid and unpaid collections as equally negative.

With that said, there are a few versions of your credit scores that ignore paid off collections. You might see these versions of your credit scores improve if you pay off a collection debt:

• FICO Score 9: Used by all types of lenders.
• FICO Score 10: Weighs missed payments more heavily than some other score models.
• VantageScore 3.0: Created by the three major credit bureaus.
• VantageScore 4.0: Helps generate scores for consumers with thin credit files.

You’re more likely to see a positive impact if the collection account is recent or has a high balance.

But keep in mind that even if it doesn’t improve your credit scores, there can be other benefits to settling or paying off a collection debt. For example, it can improve your chances of getting approved for loans, and it can help you avoid lawsuits from litigious debt collectors.

Do Medical Collections Affect Credit Differently?

In some cases, medical collections can impact your credit differently than other collections debt. One example that we mentioned earlier is that medical debt won’t hurt your scores if it’s under $500 or if you pay off the full balance.

But other details about the impact have fluctuated in recent years. Here’s an overview:

• 2022: The credit bureaus announce they’ll limit the impact of medical debt on collections. One way they say they’ll do this is by keeping medical debt off of all credit records if the debt is less than a year old.
• 2023: Fifteen states ban medical debt on credit reports and/or ban the use of medical debt in credit decisions. The bans go into effect between 2023 and January 1, 2026, depending on the state.
• 2025: A lawsuit successfully overturns certain bans on medical debt in credit reports. State laws banning medical debt reporting are also challenged.

As of early 2026, the state bans are still in place, but that could change if legal challenges to the bans are successful.

How to Remove or Dispute Collection Accounts

If there’s a collection account on your credit reports by error, you have the right to dispute the error and have it removed. For example, if the account doesn’t belong to you, or if you paid the debt on time but it was mistakenly sent to collections.

If you want to find and remove incorrect collection accounts from your credit reports, here’s what you can do:

1. Pull your free credit reports from AnnualCreditReport.com and review them for errors.
2. If you find an error, contact the debt collection agency or creditor that reported the information to the credit bureau. You can find their name and contact information along with the other account details on your credit reports.
3. Reach out to the reporting company to request a “validation notice.” This is a written notice that contains the details of the debt, which you can use to confirm whether or not you owe the money.
4. Respond to the validation letter in writing, within 30 days. Be sure to include your account number and details, as well as any documents you may have that prove your claim.
5. If the reporting company does not correct the error, reach out to the credit bureau to file a dispute. Disputes can be filed for free, and they only take a minute to submit online.
6. If the credit bureau does not correct the error, you can file a complaint with the Consumer Financial Protection Bureau (CFPB).

Strategies to Rebuild Credit After Collections

By now, you’ve probably gathered that having collection debt can really damage your credit scores. But the good news is you can always gain points back. You can also ensure your credit scores recover faster by adding new, positive information to your credit reports,

Here are a few ways to rebuild your scores after a big setback:

• Make your debt payments on time each month to avoid losing more points.
• If you have credit card debt, pay down the balances as soon as possible.
• Regularly review your credit reports and dispute any errors you find on your credit reports.
• If you don’t have any open debt accounts, consider applying for a secured credit card.
• If you have a loved one with high credit scores, ask them to add you to one of their credit cards as an authorized user.

You can also reach out to an NFCC-certified credit counseling agency for help. A certified credit counselor can review your credit reports and offer personalized tips for gaining points. They can also offer additional services to help you pay off debt, such as debt management plans (DMPs).

How to Prevent Future Collection Accounts

Nobody plans to have their debt end up in collections. However, there are proactive steps you can take to avoid ending up with collection accounts.

Instead of just hoping things get better in the future, here’s what you can do to prevent having more collections issues in the future:

• Save for emergencies: Start building an emergency savings fund that you can draw from if you need help covering a bill.
• Set up autopay: Set up automatic payments for your debt and other bills so you don’t accidentally miss a due date.
• Change your due date: If you need a few extra days to cover a debt payment, reach out to the creditor and ask if you can push back your due date.
• Try a hardship plan: If you’re facing an involuntary hardship, such as a layoff or medical emergency, ask your creditors about hardship plans. Depending on the creditor, plans can include reduced or even deferred payments.

The Bottom Line

When you have an account to go to collections, you can usually expect to see a big drop in your credit scores. It’s a situation that no one wants to be in!

Fortunately, having collections debt doesn’t mean your credit will be ruined forever. Depending on the circumstances, you may want to find a way to settle the debt. You can also rebuild your credit through healthy financial habits, like monitoring your credit reports for errors and making your debt and bill payments on time each month.