Collection items
A collection item is an account that became past due and was moved to a collections department or sold by the lender to a separate collection agency or debt collector. When that occurs, the account is listed in this section of your credit report.6 As with other information in your report, you would want to ensure that these items are valid. Keep in mind that a late payment or an account that has moved into collections may have a negative impact on your credit score. It might make obtaining a loan more difficult or more expensive. These items can remain on your credit history for seven years after you first miss a payment.
- The information in this section typically includes:
- Account information
- Date the collection account was opened
- Name of original creditor
- Original loan amount and current amount owed
- Your statement of explanation or dispute
What is not included in your credit report
While much of your credit history is contained in your credit report, there are significant areas of your personal and financial life that are not. These include your income, your investments, your bank account balances, any medical information, criminal records, level of education, marital status, or your race, religion, ethnicity, political affiliations, or disabilities.
Know your rights
Your credit report might also include an overview of your rights as found in the federal Fair Credit Reporting Act and elsewhere. This would typically be included at the end of the report. Knowing your rights helps ensure that you know what protections you have as a consumer.
While it is important to review your credit report for correct information, know that some details only stay on your report for a set number of years, as determined by laws and regulations.4 Hard inquiries remain on your credit report for two years, but only those from the past 12 months will affect your credit score. Closed accounts that had a history of on-time payments could remain up to 10 years, while accounts with negative information may only stay up to seven years.6 And some medical debt is protected from being listed on your credit report.7 It is important to verify that all information is up to date and adheres to current consumer protection laws.
You also have the right to add certain statements to your credit report. These might include identity theft, service member alerts, or a notice to freeze any credit activity.
Are credit reports the same as credit scores?
No, credit reports and credit scores are not the same. Your credit scores are not contained in your credit reports. The scores are calculated by separate companies that use the information from your credit reports. But because so much of your financial life depends on your credit score and your score is built on the history in your credit report, it is important to understand what your credit report contains and what it means.
Why your credit reports matter
It is recommended that you review your credit reports at least once a year as an important step to protect your financial health. The Consumer Financial Protection Bureau even provides a checklist to help you review your credit reports. And with a detailed list of your credit accounts and balances, you might be well positioned to adjust your borrowings, create an effective budget, and save money on interest.
How you can use your credit report to improve your credit health
In addition to being a vital tool for lenders, your credit report could provide you with valuable information about your own financial health.
When you review your credit report, for example, you might notice accounts that you did not remember you had or late payments you did not know existed. You could also see recent balances on your existing accounts. This may help you assess whether there are steps you could take to simplify your finances and save money.
One key step might be to consolidate several accounts into a personal loan. Personal loans may be used to consolidate credit card debt. Combining multiple higher-rate balances into a single loan with one set regular monthly payment might save you on interest.