The Impact of Debt Collection on Credit Scores: What You Need to Know - Cobra Financial Solutions Ltd

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When it comes to personal finance, there are few things as important as your credit score. It’s a representation of your creditworthiness, and it can significantly influence your ability to borrow money, secure loans and get a mortgage. However, if you fall behind on repayments and the debt collection process starts, you are likely to find that your credit score is impacted.

How Does Debt Collection Impact Your Credit Score?

If you fall behind on repaying a debt, you will be faced with the debt collection process.

This process typically involves the use of a debt collection agency – such as Cobra Financial Solutions – whose job it is to contact the debtor, negotiate repayment terms and recover the owed funds. However, this will have an impact on your credit score.


Your credit score is there to give potential lenders an idea of how trustworthy you are as a borrower. It contains both negative and positive information, which works together to give you an overall score. Lenders use this information to determine if you are someone they should be lending to, and if you are likely to repay the funds.


Things such as missing credit card repayments, forgetting to make a loan repayment, falling behind on your mortgage and borrowing a lot of money can have a negative impact. These are all signs that you are not effectively managing your borrowing, which will be negatively reflected on your credit score. If you have a poor credit rating, you will likely find it difficult to borrow money in the future and, if you do borrow, you might be faced with less than ideal interest rates.


Credit reference agencies – such as Experian, Equifax and TransUnion – play a key role in calculating credit scores. When a debt is passed to a collection agency, it is often reported to these agencies, resulting in a negative mark on your credit report. This can lead to a decrease in your credit score, making it more challenging for you to access credit in the future.


How Long Does Debt Collection Stay on Your Credit Report?

When something negatively impacts your credit score, it will remain on your credit report for many years. This is the case with debt collection, which can stay on your credit report for up to seven years, calculated from when the debt first appeared. Even if the debt is paid off, or you enter into a repayment arrangement, the information will still impact your credit score until it eventually drops off at the end of the seven years.


At Cobra Financial Solutions, we understand that debt collection can be daunting, for both a creditor and a debtor. But, we do everything we can to ensure the process is simple, straightforward and effective. Get in touch with our debt collection experts to find out more.

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