Can You Use a No Contract Dispute for Debt Collections?

Man ripping contract at desk

Kittisak Jirasittichai / EyeEm / Getty


Every once in awhile, there’s a new myth about a credit repair secret or loophole that you can use to get information off your credit report or get out of paying debts you owe. This time, it’s the “no contract” loophole that claims you can get out of paying debt collections.

The myth comes from a comment left on a credit forum. “Don’t Pay Them a DIME!” is the post title. “If the original creditor sold your debt to a collection agency, they also wrote off your debt on their taxes…” this much is correct. Creditors charge off accounts after they become severely past due.

“…which also wrote off your obligation to pay.” This is where the advice goes wrong. The post advises people to dispute collections, which is a right you have under the Fair Credit Reporting Act. You're further encouraged to list “contract was canceled” as the reason, under the assumption that a debt that’s sold to a collection agency is canceled.

Here’s the truth.

The original creditors assign or sell delinquent debts to third-party collection agencies to collect the debts on their behalf. While you did not create a contract with the collection agency, the original creditor has the right to sell your original contract. This is what gives the collection agency the ability to add a debt to your credit report and pursue you for the outstanding debt.


Entering a new agreement with a collector to settle or pay the debt may be considered a new contract with that collector.

Can a No Contract Dispute Work?

You have the right to an accurate credit report. This right allows you to use the dispute process to remove inaccurate, incomplete, and unverifiable information from your credit report.

When you dispute something on your credit report, the credit bureaus are required to investigate your dispute with the information furnisher. In this case, it would be the collection agency that replies to the credit bureau with a confirmation of whether your dispute is valid. The credit bureau updates your credit report based on the response.

Disputing a collection account on your credit report could be successful if the debt collector doesn’t respond to the dispute. For example, if the collection agency is no longer collecting on that debt, it may not respond to a request to verify the debt. In this case, it qualifies as “unverifiable” and the credit bureaus would delete the collection from your credit report.

If a collector is actively collecting on your debt, they may verify the dispute with the credit bureau and the collection would stay on your credit report.


Disputing a valid and active debt collection with the credit bureaus may spark the debt collector to take action on your debt. For example, it may begin calling or sending letters or even file a lawsuit against you if the debt is within the statute of limitations.

Should You Pay a Collection Agency?

Debt collectors don’t always have the necessary documentation to prove that you owe a debt and that they’re authorized to collect the debt. You can request this proof within the first 30 days of hearing from a debt collector. If they’re unable to provide proof of your debt, they can no longer collect from you, which includes listing the collection on your credit report.


Even if a collection agency can't comply with your request for validation of the debt, it can sell or assign the debt to another collection agency, which starts the process all over.

Paying a debt collection can be beneficial if you’re trying to get approved for a mortgage. The lender may require you to take care of all outstanding debts before you can be approved. Negotiating a pay for delete would allow you to have the account removed from your credit report. If you’re unable to pay the debt in full, you may be able to settle for a fraction of the outstanding balance to bring the debt out of past-due status.

Debt collections can only be listed on your credit report for seven years. This is something to keep in mind as you’re weighing whether to pay off a collection or wait for it to drop off your credit report.

Frequently Asked Questions (FAQs)

How do you dispute a debt collection on your credit report?

If you do have a legitimate issue with a debt collection that shows up on your credit report, you can dispute it through the collector or the credit bureaus. To contact the collector directly, be sure you file a letter in writing within 30 days of first receiving communication about the debt. You can also dispute the debt through the credit bureaus online via any of their websites:

Can a creditor send my debt to collections without notice?

If you become delinquent on a debt, your creditors are not required to give you notice before sending the debt to collections. Most creditors will try to work with you and help you get caught up before they resort to hiring a collection agency, though.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Equifax. "What is a Charge-Off?"

  2. Credit Boards. "Don't Pay Them a Dime By SteelerChick79,"

  3. Federal Trade Commission. "Disputing Errors on Credit Reports."

  4. Consumer Financial Protection Bureau. "Can the Credit Card Company Sell My Account?"

  5. Experian. "Collections on Your Credit Report."

  6. Federal Trade Commission. "Fair Credit Reporting Act," Page 1.

  7. Federal Trade Commission. "Fair Credit Reporting Act," Pages 50-52.

  8. Consumer Financial Protection Bureau. "Key Dimensions and Processes in the U.S. Credit Reporting System: A Review of How the Nation’s Largest Credit Bureaus Manage Consumer Data," Page 4.

  9. FTC. "Consumer Reports: What Information Furnishers Need to Know."

  10. Federal Trade Commission. "Fair Credit Reporting Act," Pages 50-51.

  11. Federal Trade Commission. "Debt Collection FAQs."

  12. Federal Trade Commission. "If I Dispute a Debt That Is Being Collected, Can a Debt Collector Still Try to Collect the Debt From Me?"

  13. Federal Trade Commission. "Fair Credit Reporting Act," Page 22.

  14. Consumer Financial Protection Bureau. "If I Dispute a Debt That Is Being Collected, Can a Debt Collector Still Try To Collect the Debt From Me?"

  15. Consumer Financial Protection Bureau. "Can a Creditor Refer My Account to a Collection Agency Before My Debt Is Due?"

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