Can a collection account be listed as past due?
In the world of credit and debt, understanding the nuances of how accounts are reported can be crucial for maintaining good financial health. One common question that arises is whether a collection account can be listed as past due. The answer to this question is not straightforward and depends on several factors.
What is a Collection Account?
A collection account is an account that has been turned over to a collection agency because the original creditor was unable to collect the debt. This typically occurs when a borrower fails to make payments on a loan, credit card, or other financial obligation. Once an account is turned over to a collection agency, the agency will attempt to collect the debt on behalf of the original creditor.
Can a Collection Account Be Listed as Past Due?
Yes, a collection account can be listed as past due. However, it’s important to note that the term “past due” can have different meanings depending on the context. In the case of a collection account, it usually refers to the period of time that has passed since the original debt became delinquent.
When a borrower fails to make payments on a debt, the account is considered delinquent. If the account remains delinquent for a certain period, typically 30 days, it can be reported as past due to the credit bureaus. Once reported, this information can stay on the borrower’s credit report for up to seven years, depending on the type of debt.
Reporting Requirements
The Fair Credit Reporting Act (FCRA) regulates how collection accounts are reported to credit bureaus. According to the FCRA, a collection account can be reported as past due if the following conditions are met:
1. The original debt was in default for at least 180 days before it was turned over to a collection agency.
2. The collection agency has made a reasonable effort to collect the debt.
If these conditions are met, the collection account can be reported as past due, even if the borrower has made any subsequent payments to the collection agency.
Impact on Credit Score
Listing a collection account as past due can have a negative impact on a borrower’s credit score. Since collection accounts are considered negative items, they can lower a borrower’s credit score by up to 100 points. However, it’s important to note that paying off a collection account can help improve a borrower’s credit score over time.
Conclusion
In conclusion, a collection account can be listed as past due if it meets certain criteria set by the FCRA. Understanding how collection accounts are reported and their impact on credit scores can help borrowers take appropriate actions to manage their debt and maintain good financial health.
