What is a collection account on a credit report?
Answer:
At one point you owed someone money and you didn't pay it so they send it to a collection agency.
It is a bad thing for your credit. When you owe someone money and do not pay after they make repeated attempts, letters, notices, the account may be turned over to a collection agency. This is a last resort for them, as all they want is the money you promised to pay. The collection agency makes money by dogging you to pay, as they get a percentage of whatever funds they recover. So, the business gets something, but not all you promised to pay. If your account is turned over to a collection agency, you are already termed a "bad debt" and a "high risk" customer and the business you failed to pay is telling anyone else that you are in default on a debt. You promised to pay and you didn't, so that makes you a bad risk. In essence, you gave your word to honor a contract and then went back on it. This is not a nice thing and a business will punish you for breaking your promise, which is fully within their rights. How would you feel if you extended credit to another and they went back on their word to pay you back in a timely manner? The bad news is your credit score goes down and makes it less likely other businesses will extend you credit in the future, and even if they do, you will be charged a higher rate as a result. If I recall correctly, this stain will be in your credit report for 7 years! And then, it will only drop off over time IF you do not have other problems with making payments on time. It is kind of like being on probation.
In short, this is an account that was turned over to a collection agency because of non payment.
It is when one of your creditors (trade references) sends your debt to a collection agency.
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