Do You Get Bad Credit if a Bill Goes to a Collection Agency?

What you don't pay affects your credit score.
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Your payment history is one of the most important factors in determining your credit score, according to, the Fair Isaac Corp. website. Your FICO score -- credit score -- is impacted by how many of your accounts are late, how late and by how much. Your payment history counts for 35 percent of the entire score. If a bill goes to a collection agency it will most likely affect your credit, but not always.

Debt Verification

If the bill isn't yours, you won't end up with bad credit, if you take the proper steps. The collection agency will assume the bill is yours. You shouldn't, if there's any question in your mind the bill isn't yours. The collection agency has to send you a letter, within five days of first contact, which specifies the original creditor and the amount of the bill. Somewhere on that letter has to be a statement that you have 30 days to dispute the validity of the debt. Sending a letter to the agency disputing the debt means the agency has 30 days to respond or stop any collections activity. The collection agency should remove the bill from your credit report if it can't validate it.

Statute of Limitations

Each state has a time limit — a statue of limitations — that a creditor, or collection agency, can pursue legal action to collect the debt. It's usually calculated from the date of your first missed payment. Here's the catch: You can start the clock ticking again on an expired debt by agreeing to pay even a tiny amount. Once you've agreed, it goes back on your credit report and that does negatively affect your credit score.

Some agencies are unethical and will report an expired debt as current and use that as threat to get you to pay. Others will try to wheedle a small payment as a gesture of your good faith, but remember, that starts the time over again. Check your report and insist the credit bureau remove any expired debts. Just because a debt is expired, or beyond the statue of limitations, doesn't mean you don't owe the money.

Disputes and Mistakes

Occasionally a creditor will make a mistake and turn a paid-in-full bill over to a collection agency. If the agency bought the bill and reports it as delinquent to the credit bureaus, it will affect your credit score. If the agency is only authorized to collect the bill, but doesn't own it, and the original creditor doesn't report the bill as delinquent, it won't be reported to the credit bureau. Sometimes there is a dispute with a service provider or product that what you received and paid for is not what you expected. That unpaid or partially-paid bill may be assigned to a collection agency and reported to the credit bureaus. If so, it will harm your credit score.


Your score will take a double hit. Creditors report delinquent accounts by how late the payments are. Once the account is charged off, that "severely impacts" your credit score, according to Your score drops again when the bill is turned over to a collection agency. That negative information stays on your credit report for seven years plus 180 days since it first went delinquent.

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