If you've got an overdue debt, you're probably wondering: When does an account go to collections? The answer varies, as you'll see below.

Most people have at least a vague idea that an unpaid bill can go to collections. If a balance remains unpaid for a certain amount of time, that’s exactly what will happen. It’s not just loan accounts either. Utility bills, medical providers, service providers and landlords can also turn an unpaid obligation into a collection.

When does an account go to collections, and how can you avoid it?

When does an account go to collections?

It’s not possible to determine exactly when an account will go to collections. It depends on the type of loan, as well as the policies of the specific lender.

It’s also governed by state law. For example, mortgage foreclosure laws vary dramatically from state to state. The foreclosure process period in Georgia is just 37 days. But it can take up to 445 days in New York.

On other loans, like credit cards and car loans, the situation is more mixed. You can generally assume that your account won’t go to collections if you’re 30 days past due. The lender will begin calling you and sending letters, but it’s too early in the process for collections. However, the delinquency will be reported to the credit bureaus.

If you’re 60 days late on a credit card, the account will usually be turned over to an in-house collections department. The tone of contact from that department will be decidedly less accommodating. At this point, your account usually won’t be turned over to a formal collection process. But it will definitely be heading in that direction.

The situation will usually be very different with auto loans. By 60 days, it’s likely that the repossession process will be initiated. If the car is repossessed, and the sales proceeds are insufficient to pay off the loan (count on it!), you will owe a deficiency balance. That will go into collection status immediately.

The collections process will start by the lender charging off your loan. Your loan will be considered nonperforming. It’s then that it will be turned over to a collection agency.

Collections and their effect on your credit report

One of the complications with collections is that they can be reported on your credit report multiple times. The original lender will report the loan as a charge-off. The collection agency will report it as a collection account. If the first collection agency sells the debt to a second one, the new collection agency will also report it.

Credit bureaus have gotten more sophisticated at getting rid of duplicate collections. But they still make it to your credit report. That’s how a single collection turns into two or three.

Collections will definitely have a negative impact on your credit score. The age of the collection is extremely important. One that happened last month will have a much bigger effect than one that happened five years ago.

The type of debt also matters. For example, a medical collection will have less negative weight than a car loan collection.

The amount of the debt is also important. A $7,000 collection is a more serious credit infraction than a $150 collection.

Also, a paid collection is always better than an open one. This is especially true as time passes since the collection was paid off.

Still, another important factor is the number of collections. One collection that took place three years ago isn’t nearly as significant as four collections spread out over the past four years. It’s even worse if they’re unpaid.

A collection can stay on your credit report for up to seven years. Even if it falls off your credit report, it’s possible that a collection agency will continue to pursue you for payment.

The collections “nuclear nightmare”

This happens when a collection becomes a judgment. When it does, the game changes, and your options become more limited.

Fortunately, most collections don’t become judgments. In most cases, lenders and collection agencies will go to the courts only on larger debts. A $500 medical collection may never go past collection status. But an unpaid credit card collection of $5,000, or an $8,000 deficiency on an auto loan, almost certainly will.

From a credit standpoint, a judgment is much more serious than a collection. That’s because the judgment becomes part of your public record. Worse, your ability to negotiate a settlement will mostly disappear if it goes to judgment status.

It gets still worse. Once a creditor obtains a judgment against you, they have legal rights to pursue collection of the debt. They’ll go from calling you three times a day, to garnishing your wages, or even seizing your bank accounts to satisfy the debt. With a judgment in hand, they don’t need your permission to do either.

When a collection converts to a judgment, your relationship with the creditor shifts decidedly in favor of your opponent. Do everything you can to prevent collections from becoming judgments.

How to avoid an account going to collections

Maintain communication with your creditors

The first best way is to maintain communication with your creditors. That should happen as soon as you reach the 30-day late stage—and preferably sooner. Never wait for the creditor to contact you about the delinquency. Payment on the debt is, after all, your responsibility.

Make payments on past-due debt

You should also make every effort to make payment on the past-due debt as soon as possible. A partial payment is better than no payment at all. Some creditors are willing to work out a multi-month settlement to enable you to catch up.

Don’t let the late payment roll

Do your best to avoid a 30-day late payment rolling into 60 days. You will then be two months behind, rather than one, which will double the amount of money you’ll need to come up with.

If you do reach the 60-day mark, ask the creditor for a payment plan, or about options for a hardship settlement. It’s always best to work out a settlement with the original creditor. Collection agencies are more aggressive and less forgiving. They simply want to get paid.

But even they may work out a settlement…

What to do if an account goes to collections

Know your rights

First, know your rights under the Fair Debt Collections Practices Act. The Act prevents collection agencies from harassing you, calling you at inconvenient times, or discussing your situation with third parties. They are also prohibited from claiming to be government agents, or threatening you with arrest. You will have legal recourse if they violate any of these provisions, and there are many more.

It may even help to specifically state to the collection agency that you are aware of your rights under the Act. It won’t make them go away, but it might force them to calm down a bit.

Suggest settling for less than the full amount

Even with a collection agency, suggest settling the debt for less than the full amount due. When you do, make a lowball offer. If the debt is for $1,000, offer $300 in full settlement. Collection agencies only get paid what they can collect on a debt. A particularly desperate one may settle for much less than the full amount. It’s even more likely if the collection is at least a couple of years old.

Expect them to reject your first offer. For example, the agency may counter at $850. You can counter their counter at $400. Eventually, you may split the difference and settle at $600.

Making payment to a collection agency

Very important! A collection agency is not your friend. Verbal agreements don’t count.

Get written acknowledgment

Collection agencies will use these agreements to get you to pay some money, then return to demanding the full amount. Before sending any money to a collection agency, first get a written acknowledgment of the agreed-upon settlement. The agreement should also specify that the collection agency will report the account as paid to all three credit bureaus.

Only then should you send money. Keep a copy of your check, and all other relevant documents. (Seriously—no ”brain farts” on this step!)

Get a copy of your credit report

After 30 days, get a copy of your credit report. Make sure that the collection shows as paid. If it doesn’t, contact the collection agency, and remind them to make the report – again, to all three credit bureaus. If they don’t, you will have to contact the credit bureaus yourself. You’ll have to supply a copy of the written agreement, as well as evidence of payment to each of the bureaus.


When a bill goes to collections, it’s a stressful, lengthy process to get it paid. You’ll need to persevere to the very end.

If the collection agency is particularly uncooperative, you may have to hire an attorney who specializes in credit issues.

Sometimes a collection agency will respond favorably to a call from an attorney, or receipt of a letter on the attorney’s stationary. It will cost you some money to pay the attorney’s fee, but it’ll be the only way to get rid of the collection agency.

Have you ever had to deal with a collection agency? How did you work it out?

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About the author

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Since 2009, Kevin Mercadante has been sharing his journey from a washed-up mortgage loan officer emerging from the Financial Meltdown as a contract/self-employed “slash worker” – accountant/blogger/freelance web content writer – on Out of Your Rut.com. He offers career strategies, from dealing with under-employment to transitioning into self-employment, and provides “Alt-retirement strategies” for the vast majority who won’t retire to the beach as millionaires. He also frequently discusses the big-picture trends that are putting the squeeze on the bottom 90%, offering work-arounds and expense cutting tips to help readers carve out more money to save in their budgets – a.k.a., breaking the “savings barrier” and transitioning from debtor to saver. He’s a regular contributor/staff writer for as many as a dozen financial blogs and websites, including Money Under 30, Investor Junkie and The Dough Roller.