Credit & Debt
What is Collections?
Collections happens when you don't pay a debt and the creditor sends it to an internal collections department or sells it to a third-party agency. They try to recover what you owe on credit cards, medical bills, utilities, and other debts.
Debt collection is regulated by the Fair Debt Collection Practices Act (FDCPA), enforced by the CFPB and FTC. Collectors can't harass you, call before 8 a.m. or after 9 p.m., or contact you at work if you've told them not to.
A collection entry shows up as a separate account on your credit report and can severely lower your score. It stays there for up to seven years from the date of your first missed payment—even if you eventually pay it.
Quick Facts
PRACTICAL EXAMPLE
A consumer leaves an unpaid utility bill of $300. After 90 days, the utility company sells the account to a collection agency. The agency contacts the consumer and reports a collection entry on their credit report, lowering their credit score.
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