The appearance of a debt collection in your credit report can be scary, and realizing that the credit history can go on can be much scarier.
The good news is that your credit score won’t be completely ruined by a collection account. Here's what happens when you will have an account with collection:
Debt collectors are going to use many avenues to try and reach you.
Debt collectors want to get your attention when you have a collection account. In addition to calling you several times a day and sending payment notices to your address, it will appear like a "collection" state update to your credit report.
This will happen without your notice, because investors will not have to inform you when they will submit your account to collections.
Account status “Collection” reduces your credit score.
With a collection account on your credit report, your credit score will always decrease. A major payment delinquency sends the message that you do not pay your debts consistently.
The low score will affect your ability in the future to earn credit cards and loans. It is also necessary to note that the size of the debt received does not make a huge difference. Whether you owe $2,000 or $20,000, your credit score will drop with the "collection" status on your account.
Your credit score will get the greatest hit at the start.
Immediately after you receive the collection status, your credit score gets the highest hit. However, the date your debt collection is recorded in your credit report is important. The date on which your report appears is when the collection agency has assumed collection responsibilities. The later this date, the more the status affects your score. Given this status, however, creditors generally don't keep updating your account. This reduces the effect of the "collection" status over time.
So, how many points will you lose with a collection account?
The amount your credit score drops as a result of a collection depends on how much your credit score is before your collection status. If you had a score earlier in the 700s, the initial collection can cause your score to fall by over 100 points. Persons with lower scores can see a smaller drop. However, it will still be important.
