Can a Collection Account Be Listed as Open?

Collection accounts can appear on your credit report, reflecting a debt that an original creditor has deemed uncollectible and transferred to a third party. Their presence signifies a past financial obligation that was not met as originally agreed, and this information is accessible to potential lenders and creditors when they review your credit history.

How Collection Accounts Are Reported

When a debt goes to collections, the original creditor typically sells the debt to a collection agency or assigns it to them for recovery. This leads to the collection account appearing on your credit report as a separate entry, distinct from the original account. Credit bureaus categorize and display collection accounts with various statuses, such as “open,” “unpaid,” “paid,” or “settled.” An “open” status for a collection account indicates that the debt is still outstanding and actively being pursued by the collection agency.

Unlike a revolving credit line, an “open” collection account does not imply an active line of credit you can use. Instead, it reflects the ongoing nature of the debt and the collection activity. Even after a collection account is paid, it typically remains on your credit report, but its status changes from “unpaid” to “paid” or “settled.” This means the entry is not removed entirely just by payment.

Duration of Reporting

Collection accounts remain on a consumer’s credit report for a specific period, as governed by federal law. The Fair Credit Reporting Act (FCRA) dictates that most negative information, including collection accounts, can be reported for up to seven years. This seven-year period is calculated from the date of the original delinquency (DOFD) on the original account, not from when the account went to collections or when it was paid. The DOFD is the date the account first became delinquent and was never subsequently brought current.

The reporting period can extend up to seven years and 180 days from the DOFD. This additional time accounts for any grace periods before the debt was charged off or sent to collections. Paying a collection account does not remove it from your credit report before this statutory period expires. The account will automatically fall off the credit report once the seven-year-plus-180-day period from the DOFD has passed.

Credit Impact of Collection Accounts

Collection accounts can have a negative impact on credit scores. They signal to lenders that a past financial obligation was not fulfilled as agreed, indicating a higher credit risk. The severity of the impact can depend on several factors, including the amount owed, the age of the collection, and whether it has been paid. An unpaid collection account carries a more severe and prolonged negative impact on credit scores than a paid one.

Newer credit scoring models, such as FICO Score 9 and VantageScore 3.0 and 4.0, may treat paid collection accounts differently from older models. These newer models may disregard or weigh paid collection accounts less harshly, or even ignore them entirely, especially if the original balance was small or if it was a medical collection. However, many creditors still use older scoring models for lending decisions, which may not differentiate as much between paid and unpaid collections. The presence of any collection account on a credit report can still negatively affect a consumer’s credit, regardless of its paid status.