While there are some polite and honest debt collection companies doing their job, just know they are the extreme minority. So let’s have some education about what they can or cannot do as they operate mostly under intimidation, manipulation and fear.
Once your account goes to an outside collection agency the account is usually “charged off” which means 180 days of nonpayment has gone by and federal law requires the debt be written off their books. The coding of this account on your credit report cannot get any worse.
This charge off date is what is measured for the seven years the account can stay on your credit report. So the negative account will stay on your credit file for seven years. The OTHER issue to be very concerned about is the legal statute of limitations. This is the timeline you have for the creditor to file a lawsuit against you which will turn into a judgment and if that happens no bank will lend you money with a judgment against you, even with a 810 credit score.
Each state has their own timeline for how long a creditor can sue you. Most states including Texas and California are four years. But some states like Illinois and West Virginia are ten years (never going to move there!). The best way to confirm the date for your state or to ensure the timelines have not been changed is to go to the Secretary of your state’s website to confirm these dates.
So once you have confirmed this information and a debt collector calls you and threatens to sue you understand it is a civil matter only. The sheriff or constable is not coming to your house to arrest you. And if the debt is old enough so you know they can’t sue you once you tell the debt collector that and that they broke the law by saying that knowing they can’t they typically get off the phone with you rather quickly since they now know you are an informed consumer.
Also… debt collectors buy debt from creditors for pennies on the dollar so NEVER pay more than 50% of the debt if you choose to pay the debt. In the past I have gotten collectors to go down as far as 30% for debts only a few years old.
But UNDERSTAND that if the debt is 5-6 years old and you do pay it make sure in the paperwork you get BEFORE you make any type of payment that it says the debt is settled in full. And the account WILL stay on your credit report for another seven years even though it will show a zero balance. It DOES NOT get removed unless you are able to negotiate that as part of the agreement but most debt collectors will not remove it but it can happen.