What Happens When a Credit Card Goes to Collections?

If you fall too far behind on your credit card payments, you may reach a point where your credit cards go to collections. And that can be nerve-wracking.

Try not to panic, though. Even if your credit card debt ends up in collections, there are steps you can take to make your situation better. Let's review what happens when your credit card goes into collections, what rights you have, and how you can minimize the financial damage.

Freedom Debt Relief is not a Credit Repair Organization and does not provide or offer services or advice to repair, modify, or improve your credit.

Why Credit Cards Go to Collections

Credit cards can go to collections after you haven't made a payment for quite some time—usually after 90 to 180 days.

When you're behind on your debt, your credit card company may use its own in-house debt collectors to try to get you to pay, or they could hire an outside debt collection firm. They might also sell your debt to a debt buyer that then takes over ownership of your debt and uses their own collectors. 

Third-party debt collectors are subject to the Fair Debt Collection Practices Act (FDCPA), which means there are rules they need to follow about when they can contact you and how they must treat you. Any debt collector that reaches out to you must provide information about the debt you owe, including who owns it and the total owed, when they first contact you or within five days of first contact.

How Credit Card Collections Affect Your Credit

Once your credit cards go into collections, those accounts are likely to appear as delinquent on your credit report. That could reduce your credit score substantially.

Your payment history carries a lot of weight when calculating your credit score. So when a debt of yours lands in collections, it could bring your credit score down quite a bit, making it harder to borrow money when you need to.

It typically takes seven years for accounts that have gone to collections to fall off of your credit reports. However, different credit scoring models may treat accounts in collections differently. 

Newer versions may ignore accounts in collections that have been paid, while older models may regard accounts in collections negatively whether they've been paid or not. This may not matter much to you in practice, though, as you won't know which scoring model a potential lender chooses to use. 

What to Do When Credit Card Debt Goes to Collections

When your credit card debt goes to collections, your first inclination may be to panic. Instead, try to stay calm and remember your rights. 

Your debt collector must validate your debt within five days of making contact with you. They're required to tell you:

• How much you owe

• The name of the original creditor

• What steps to take to dispute the debt

Make sure to ask for this information if it isn't provided to you when a debt collector first reaches out.

If your debt collector first contacts you by phone, ask for your debt to be validated in writing. You have 30 days to dispute the debt in writing, and during that time, all debt collection activity must be paused. If the information on your credit report related to your debt is inaccurate, you can dispute that with the credit bureaus as well. 

Know your rights under the FDCPA

The purpose of the FDCPA is to protect consumers from deceptive and abusive debt collection practices. Under the FDCPA, debt collectors aren't allowed to:

• Call you before 8 a.m. or after 9 p.m. unless you agree.

• Contact you at work if you instruct them not to.

• Reach out to you by text or email if you say not to.

• Privately message you on social media if you tell them not to.

• Contact you more than seven times in seven days for a given debt.

• Threaten to hurt or arrest you, or use obscene language, when communicating with you. 

• Say they're going to sue you if they don't intend to take legal action.

• Lie about the nature of your debt, including the amount you owe or their identity. 

You have the right to request that a debt collector stop contacting you completely, and they have to listen if you do so in writing. However, this will not make your debt go away. And if you send a cease-and-desist letter, the debt collector could decide the only path forward is to sue you.

You should also know that the FDCPA applies to debt collectors only—not your original creditors.

Negotiate with debt collectors

Creditors and debt collectors alike share one common value: something is better than nothing. If you show financial hardship that makes it impossible to pay the full amount you owe, debt collectors may be willing to accept a smaller amount if it means getting something back. 

This is especially common if the debt collectors are working on behalf of a debt buyer that purchased your debt for less than it was worth. They may be willing to forgive the remainder of your debt if that enables them to at least recoup some of the money without having to pursue a lawsuit against you. 

When negotiating your debt, you have two options. You can either offer a reduced lump sum payment to settle your debt, or you can suggest a payment plan that works for your budget. Either way, before making any payments, be sure to get whatever agreement you reach with your debt collector in writing. 

Consider professional debt relief help

If you don't want to negotiate on your own, or have tried and aren't making progress, consider hiring a professional debt relief company to negotiate a settlement on your behalf. The benefit of using a debt relief company is that they have experience with the settlement process, whereas you might feel overwhelmed if you try to negotiate on your own. 

Also, professional debt relief companies often have established relationships with creditors and may achieve better results than what you can negotiate yourself. Debt relief programs typically take two to four years to complete, and you shouldn't be charged settlement fees until an agreement is reached, approved by you, and a payment has been made.

The best debt relief companies offer a free evaluation to see if you're a good candidate for debt settlement. This lets you ask questions about the process and costs, as well as giving you an idea of what to expect.

What Happens If You Ignore Credit Card Collections?

Initially, ignoring debt collectors will likely result in ramped-up collection efforts: they'll call more often and could reach out to friends or family trying to get in touch with you. If you continue to ignore them, the situation could escalate.

When you continuously blow off a debt collector, they may decide the only way to get paid is to file a lawsuit against you. If they receive a judgment in their favor—which might happen automatically if you don't respond to the lawsuit or fail to show up in court—you could face wage garnishment or have funds from your bank account seized. 

Rather than hope the problem will go away on its own (it won't), respond to your debt collector and try to negotiate a debt settlement that works for both of you. If your situation is complex, you may want to reach out to a debt relief company or even an attorney for guidance.

How Many Credit Card Payments Can You Miss Before Collections?

The number of credit card payments you can miss before your account goes to collections depends on the creditor. Some credit card companies might send your account to collections after 90 days, while others might wait until you haven't made a payment for 180 days.

Some credit card companies might also try to use an in-house team to collect what you owe before turning your account over to an outside collection agency.

If you're having a hard time making your credit card minimums, it's important to contact your credit card company as soon as possible to discuss your situation. Some credit card companies offer hardship programs for borrowers who need more leeway making payments. Reaching out proactively could help you avoid having your account land in collections.

Next Steps After Credit Card Collections

If your credit card debt has gone to collections, take a deep breath and try to stay calm. Also:

• Make sure your debt collector verifies the debt, and dispute it if it's not valid.

• Communicate with the collection agency and try to negotiate a settlement or payment plan.

• Contact a debt relief company if you need help negotiating your debt.