Credit Q&A: Who Can Report Me to a Debt Collector?

Q: A freelance worker is threatening to report me to a collection agency if I do not pay a bill for work I don’t consider completed. Will this affect my credit score? Are there restrictions on who can and cannot report unpaid debts to a collection agency? – Cara

A: Typically, whenever a debt goes unpaid for a long period of time, a creditor will hire a collections attorney or a collection agency to recoup the debt for them.

This practice is especially common among companies that don’t tend to report debts directly to the three major credit bureaus – such as a hospital or a cable company – since most collection agencies let Experian, Equifax and TransUnion know about the debt as a way to entice the consumer to pay up.

According to Robert Markoff, a Chicago-based collections attorney, lawyers don’t usually report directly to the bureaus. However, you may recall, any court judgment that results from a claim filed against you will make it back to the big three so the overall effect is largely the same.

Now, we’re sorry to say, there are very few concrete restrictions as to who can choose either an attorney or debt collection agency to settle the matter.

“There are no legal parameters that say who can send a bill to collections,” Markoff tells MainStreet. He explains that the only real universal stipulation is that the person seeking representation from either an agency or an attorney is the owner of the debt in question. However, he adds, “generally speaking, a collections agency or a collections attorney will make sure there is some validity to the claim before accepting it.”

This is because, should you, the debtor, choose to dispute the claim, the bureau will have an investigation conducted into whether or not the debt is valid. 

While the investigation is being conducted, the data furnisher, or credit bureau, is required to show that the account is being contested during an investigation and, as previously reported, this notation will cause most major credit score models to ignore the unpaid bill. As such, your credit score will remain intact until the dispute is formally resolved.

Of course, whether or not the debt is ultimately removed depends on the circumstances of each case.

FICO, one of the most popular credit score models, will ignores any collection claim less than $100, so there is a bit of wiggle room if your bill is under that amount.

That being said, Tom Quinn, consumer credit expert for Credit.com, points out that most collection agencies are unlikely to take on a small number of isolated past due loans on which to collect since it wouldn’t financially be worth their while.

This means that the disgruntled freelancer seeking restitution could file a lawsuit and, should that happen, you have to weigh your options: pay off a small debt or a possible legal bill.


Keep in mind, there are laws in place that say what a debt collector can and cannot do when seeking to recoup funds. You can find out what these laws are and what recourse to take if you think someone is crossing the line in this separate MainStreet Q&A.


Want to know what can and can't affect your credit score? E-mail your questions to editors@mainstreet.com.

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