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Why Debt Collection Agencies Can Look at Your Credit Report

Sept. 28, 2016
Credit Score, Paying Off Debt, Personal Finance
Why Debt Collectors Can See Your Credit Report
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If your debt has been sent to collections, you probably want to keep your life as off-limits as possible. Although you can limit some aspects — you can stop collectors from calling you at work, for instance, or calling before 8 a.m. or after 9 p.m. — your credit report is, unfortunately, fair game.

Why can a debt collector see my credit report?

There are a number of different businesses and agencies that can see your credit report without your explicit consent: a potential landlord, a car insurance company drawing up a quote, a lender looking to preauthorize you for a credit card — or, thanks to the Fair Credit Reporting Act, debt collectors.

Collection agencies will often scan your report for contact information, such as a new phone number or address, recent activity on your credit accounts, or information that will help the collector decide whether you’ll be able to pay what you owe.

Will it lower my credit score?

In some cases, an inquiry into your credit report can lower your credit score. This happens in the case of a “hard pull” — for example, you ask a lender to pull your credit because you’re applying for a loan. This temporarily dings your credit score, on the theory that if you apply for a number of new loans in a short period of time, you’re a higher credit risk.

Unfortunately, since debt collections are directly connected to financial transactions, they’re considered hard pulls, and your score may take a temporary hit — though not nearly as much as for having an account in collection.

What can I do?

Although you can’t stop a collector from looking at your report, you can make sure that the debt is valid. A debt collector who’s pursuing you for payments is required by law to give you certain information about your debts if you request it. You’re entitled to know the amount owed, which institution you owe it to, and how you can dispute or validate the debt.

If you dispute the debt in writing within 30 days of when you receive that information from the collector, the collection agency can’t contact you until after the dispute has been investigated and settled, and you’ve received written validation of the debt.

If it turns out that the collection agency made a mistake and shouldn’t have been pursuing you, you are entitled to request that the relevant negative information on your credit report — including the hard pulls — be removed. Check out the Federal Trade Commission’s website for more information, including how to get inaccuracies scrubbed from your report.

This article was updated Sept. 28, 2016.