Q: John, I have a collection from an old cable bill that’s 3 years old. From reading your articles I know I’ll have to live with it on my credit reports for 4 more years. Recently I was told by a mortgage broker that if I pay it or settle it I’ll reset the credit reporting clock to 0 years and I’ll have it on my credit reports for 7 more years from the date it was paid off. Is this true? The mortgage broker has no incentive to lie to me. If it is true, why would I pay it? I can not pay it and it’s gone in 4 years or pay it and it’s gone in 7 years? That seems incredibly unfair.I get that question or similar questions at least once a week. It sounds like a horrible conundrum, doesn’t it? I’m sure he wasn’t lying to you but what he told you is definitely, thankfully, incorrect. The amount of time a collection can be reported is clearly defined in the Fair Credit Reporting Act. The language is as follows…
“The 7-year (credit reporting) period referred to in paragraphs (4) and (6)6 of subsection (a) shall begin, with respect to any delinquent account that is placed for collection (internally or by referral to a third party, whichever is earlier), charged to profit and loss, or subjected to any similar action, upon the expiration of the 180-day period beginning on the date of the commencement of the delinquency which immediately preceded the collection activity, charge to profit and loss, or similar action.
What this all means is a collection can remain on your credit report for 7 years from the date the original account was charged off or 7.5 years from the date of the first delinquency that immediately lead to the original account being charged off.
There is no language in the act that allows that time period to be re-aged to coincide with payments, a sale of a debt, a settlement, or any other activity relative to a collection account.
Credit Reporting Expert, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling. He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. Follow him on Twitter here.