Financial Counseling Certification Program (FiCEP) Practice Exam

Once a collection account is paid, what happens to the negative history on the credit report?

1. It is immediately removed

2. It remains permanently

3. It takes time to be updated

4. It is removed after five years

The correct answer is: It takes time to be updated

When a collection account is paid, the negative entry does not simply disappear immediately from the credit report. Instead, it takes time to be updated in the credit reporting systems. Typically, once paid, the account will be updated to reflect that it has been settled, but the history of the account, including the negative mark, remains on the credit report for a certain period. This is due to the standard practices of credit reporting, where any account, regardless of payment status, will continue to show its history. The reporting agencies need time to process changes, and consumers may not see an instant update regarding the payment status of a collection account. Therefore, option C highlights the process and the reality that while paying the account can have a positive impact moving forward, the negative history will still linger until it is officially updated, and this update does not happen immediately.