In the arena of credit reporting, there probably isn’t any issue that causes more confusion, or generates more false information, than collection account listings. For example, you may have heard that collections agencies trade or sell accounts amongst themselves because this prolongs the time the collection account can remain on your credit report. This is 100% NOT TRUE!
To accurately determine how long you do have to wait until a collection account ages off your credit report, you need to match up the collection account with the original creditor or business the debt was with. For example, the debt may be currently listed on your credit reports as being owned by XYZ Collection Agency, but the original debt was owed on ABC Department Store credit card.
According to the Fair Credit Reporting Act (FCRA)- the legislation that governs credit file information- the date a negative account drops off your credit report is seven years from the date of your last activity on the account. There is a common misconception that a collection account will stay on your credit report for seven years from when the account is charged off. Again, THIS IS NOT TRUE.
Let’s look at an example to illustrate how this works. In this scenario, let’s say you had a credit card that you regularly made charges on and paid off each month. However, you lost your job and your emergency savings and unemployment eventually ran out. You stopped making payments altogether on the credit card in January of 2009. The credit card company called and wrote constantly for five months to try to get the money you owed them. Eventually, in July 2009, they sold the debt to a collection agency who then took over trying to get from you the money owed. In this example, the date this item will fall off your credit report would be at the end of January 2016 since that is the date of your last activity on the account.
Many credit reports helpfully list the date an item will be removed from your credit file. But also know that you have the ability to figure out this information yourself, if you can connect the collection account with the original debt. If you ever see an account that you believe has been kept on your credit reports for too long, be sure to dispute that items with the credit bureau - Equifax, Experian or TransUnion - listing that information.