Time Frame

• Collection accounts can be reported on your credit file for approximately 7 years. These accounts will then fall from your credit file. If you have collection accounts on your file longer than a seven-year time frame, contact the credit reporting agency to have them removed. Forward a letter to the credit-reporting agency with your request for removal and they should comply within a reasonable amount of time. Make sure this information is removed from all three credit-reporting agencies.
  
  

Disputes

• Sometimes collection accounts are the result of a dispute. If you are disputing some information, you should contact the credit-reporting agency that is reporting the derogatory information. They will have 30 days to investigate the disputed claim. If they have not reached a resolution at the end of 30 days, they must remove the information from your credit file.
  
  

Credit Score

• When you have a collection account reported on your credit file your credit score, can drop 20 to 60 points. Lenders use credit scores to determine your level of risk as a customer and the likelihood that you will default on a loan. If your credit score is too low, you could be rejected for a credit card, a mortgage loan or a car loan. Some lenders will approve you for credit if there are collection accounts on your report, but they will charge you a high rate of interest and a number of fees.
  
  

Bad Debts

• Collection accounts which have not paid in six months or longer, allow the creditor to write them off as a bad debt or as a charged-off account. This information will show up on a credit report as a "9," which is the code for a charge-off. An installment account such as an automobile loan will show up as an "I-9." The "I" is for installment account. Revolving accounts such as credit-card accounts will appear as an "R-9," with the "R" standing for revolving. A charged-off account can reduce your credit score even more.
  
  

Judgments

• Collection accounts which are charged off eventually get turned over to a collection agency. Now the opportunity for the collection agency to get a judgment exists. Judgments can also damage a credit score. When a judgment is received, the collection agency can seek other methods to collect the debt such as bank levies, garnishment of wages or filing a lien against real estate ot other assets. Judgments are also public records.
  
  

Debt Settlements

• If you have a collection account which you paid according to a settlement agreement, it will show up on your credit file as a paid settlement. Even though you paid this account, other creditors may be reluctant to extend you credit because this is a sign that you were experiencing financial problems. Paid settlements will also remain on your credit file for seven years.