What Is a Collection? (And Why It Matters)
A collection is a debt that the original creditor gave up on collecting and sold to a third-party debt collector. When you see "collection" or "charged-off" on your credit report, it means:
- The original creditor (credit card company, hospital, etc.) wrote off your debt as a loss
- They sold it to a collection agency for pennies on the dollar
- The collection agency now owns the right to collect from you
- This negative mark stays on your credit report for 7 years from the first missed payment
⚠️ Critical Warning
Paying a collection does NOT remove it from your credit report. It simply changes the status to "paid collection"—which still hurts your credit. Never pay without a "pay for delete" agreement in writing first.
How Collections Affect Your Credit
A single collection can significantly damage your credit, depending on your current standing. The newer the collection, the bigger the impact. Collections under 2 years old hurt the most.
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How to Read a Credit Report (Section by Section)
1. Personal Information
Check for errors in your name, address, employer, or SSN. If you see an address you've never lived at, that's a red flag for identity theft or mixed files (your info merged with someone else's).
2. Accounts (Tradelines)
Each account shows:
- Account Name: Creditor or lender
- Account Number: Usually partially masked
- Date Opened: When the account was established
- Balance: Current amount owed
- Status: Open, closed, charged-off, in collections
- Payment History: 24-48 months of on-time vs. late payments
💡 Pro Tip
Look for "30," "60," "90" in the payment history. These indicate late payments. A "CO" means charged-off (sent to collections). "CLS" means closed.
3. Collections & Public Records
This is where collections, bankruptcies, liens, and judgments appear. Check the date of first delinquency—this determines when the item falls off (7 years later).
4. Credit Inquiries
Hard inquiries (from credit applications) may affect your credit. Soft inquiries (checking your own report, pre-approvals) do not.
Common Credit Report Errors to Look For
Accounts That Aren't Yours
Look for accounts you never opened. This could be identity theft, or a "mixed file" where your credit history got merged with someone who has a similar name or SSN.
Incorrect Account Status
Accounts you paid off might still show as "open" or "past due." Closed accounts should say "closed by consumer" not "closed by creditor" (which looks bad).
Duplicate Entries
The same debt listed twice—once by the original creditor and once by the collection agency. This double-counts against your credit.
Outdated Negative Items
Negative items must be removed after 7 years (10 for bankruptcy). Check the "date of first delinquency"—if it's older than 7 years, it must go.
Incorrect Balances or Limits
High balances hurt your credit utilization ratio. Make sure your credit limits and current balances are accurate.
🚨 Don't Dispute Yet!
Before you dispute ANYTHING, you need to know the 5 critical steps that protect you from common mistakes. Most people skip these and their disputes get rejected—or worse, they accidentally reset the statute of limitations. Get our free guide below to learn these steps.