How to Remove Collection Accounts from Your Credit Reports

Learning how to remove collections from your credit report can help you clean up your credit history and open better financial doors in the future.

The post How to Remove Collection Accounts from Your Credit Reports appeared first on Credit.com.

Collection accounts are bad for your credit score. These negative marks on your credit report indicate you might not pay your bills on time—or ever, which is why lenders don’t like to see them.

Collection accounts can stay on your credit report for up to 7 years. This makes it harder to get approved for credit during that time. Learning how to remove collections from your credit report can help you clean up your credit history and open better financial doors in the future.

What Are Collection Accounts?

When a lender doesn’t receive payments for a line of credit, they may choose to eventually sell that credit to a debt collection agency to get some of their money back. That line of credit will then be reported to the credit reporting bureaus as a collection account—a collections account for a credit card, personal loan, etc.—and the debt collection agency will then try to collect on that debt for themselves.

For you, that means that if you have a debt in collections you may have the collections agency contacting you to collect on your debt, and your credit score will likely have gone down because of that collections account.

How to Remove Collections from Your Credit Report

Before we get into the nitty-gritty, we need to level with you. Collection accounts aren’t easy to remove. Before you proceed with an action plan, make sure your expectations are realistic. If a collection account on your credit report is accurate and you pay it off, it won’t just disappear. To remove an item completely, you’ll have to negotiate with the debt collection agency and ask for a goodwill removal.

If you have a lot of inaccurate collection accounts on your report, you might need help from a reputable credit repair agency. Credit repair agencies can help navigate credit bureau territory, and they frequently can help consumers understand how to handle trickier situations.

But if you’re committed to a DIY approach to collection removal, the following steps may help you clear up your credit profile.

1. Review Your Credit Report and Validate the Accurate Data

Obtain copies of your credit reports from all three credit bureaus—Equifax, Experian, and TransUnion. Each credit bureau has different information about you. Therefore, if you challenge an unsubstantiated collection account on all your credit reports, you’ll have to create disputes with each bureau.

You’re entitled to one free copy of your credit report per bureau each year. To get your credit reports, head to AnnualCreditReport.com. You’ll be able to view all the information on file about you at each agency—but you won’t see your credit scores. To see a quick credit snapshot and your informational credit score, sign up for Credit.com’s free Credit Report Card, too.

Review the items on your credit report to make sure they’re accurate.

• Do you recognize the listed lenders?
• Does your account information seem accurate?
• Are all the items on your report familiar to you?
• If you fell behind with payments on an account, when did it happen?

With all that information in hand, you’ll be ready to make your next move.

2. Dispute Inaccuracies

Credit bureaus aren’t allowed to report inaccurate or incomplete information. Therefore, if any of the information you see on your credit report is inaccurate or incomplete, you have the right to challenge the accuracy of that item. When a credit bureau receives a challenge, it has between 30 and 45 days to investigate and confirm—or correct—the information it holds on file about you.

You can dispute inaccuracies online or by sending a letter. If you choose the online route, sign up for a free account with each credit bureau and follow their process for filing an online dispute.

If you choose to send a letter, include all of the following:

• A copy of your credit report with the inaccurate information circled
• Identifying information about the inaccurate account, including the account number
• Why the information is inaccurate
• What you want the credit bureau to do—remove the information or edit it for accuracy
• Any backup documentation that illustrates you’re correct in your dispute

3. Send a Pay for Delete Letter

You can’t get accurate information removed from your credit report through a dispute. However, you may be able to get a debt collection agency to remove a collection from your report if you agree to pay the debt.

Here’s how to remove paid collections from your credit report—or at least try to do so:

• Send a letter to the debt collection agency or ask via phone for this option.
• If the agency agrees, get the agreement in writing. 
• Pay the debt
• Follow up to make sure the debt is removed from your report.

Note that this is a long shot, as many debt collection agencies won’t change accurate information on credit reports. The agency may have an agreement with the credit bureaus not to do so.

4. Pay Down the Collection Accounts

If you can’t get a paid collection account removed from your credit report, it may be a good idea to work on paying it. A collection account that is paid looks less negative on your credit report than an account that’s still open. Therefore, this may earn you a bit of goodwill with future creditors. Plus, a paid collection account may have a smaller impact on your credit score than an unpaid collection account.

5. Ask for Goodwill Deletions

If you have an excellent credit history, you may be able to get the original creditor or collection agency to remove the derogatory mark as a favor or act of “goodwill.” You’ll generally have to pay the collection account off first, though, if you haven’t already done so.

If you have an otherwise blemish-free credit history, go ahead and ask the financial institution for a goodwill deletion. Removal after payment might be against their rules—but goodwill deletions might not be, and it never hurts to ask. You can find goodwill letter templates online to help you communicate with your lender.

6. Don’t Be Afraid to Wait and Check Back

Waiting might not be an instant fix, but it’s usually a successful tactic. After seven years, most collection accounts fall off your credit report—so if you’re closing in on seven years, just hang on. The impact on your credit score is probably already lessened. After the collection account disappears, your credit score might improve. 

FAQs

What Are Debt Collection Agencies?

Debt collection agencies are third parties that work to collect old debts. In many cases, they buy old debts from creditors at a fraction of the actual debt value, hoping to collect the debt and make a profit.

For example, say a credit card company has $100,000 in consumer account debt that’s at least 180 days past due. These debts are in default. The credit card company may package this debt and sell it to a debt collection agency for $10,000. The company doesn’t believe it will collect the debt and doesn’t want to spend the money to chase it.

The debt collection agency does chase the debt. Even if the agency collects only $20,000 of the original $100,000, it makes a profit.

What Does It Mean to “Go into Collections”?

If you find out that your debt has gone into collections, it can mean one of several things:

• Your creditor may have moved the debt from the regular billing department to an internal collections department. This is an escalation that means the creditor may take further action to collect the debt.
• Your creditor may have hired a third party to collect its old debts and sent your account to them. The creditor still is overseeing the effort, but the third party is handling the collection activity.
• Your creditor may have sold the debt to a debt collection agency. 

How Does Debt End Up in Collections?

Debt ends up in collections when you fail to pay the debt as agreed. This can happen when you don’t make payments for a period of time. Generally, missing a single payment and catching up won’t mean your debt ends up in collections. Most lenders wait until you’re several months behind before taking action.

Debt also can end up in collections by mistake. Typos, paperwork issues, or lost payments could lead to your debt ending up in collections or a collection being listed on your credit report. This is why it’s important to regularly keep an eye on your credit reports.

Can I Have a Paid Collection Removed from My Credit Report? 

If you pay your collection account off, you might be able to get the collection agency to remove the negative item from your credit report at the same time. Sometimes, collection agencies offer. to remove negative items to sweeten the deal. 

On other occasions, collection agencies claim they can’t remove negative items, even if accounts are fully paid. Lenders and collection agencies often can take this step if they’re willing to, so if you receive a stonewall response, restate your case to the agent’s supervisor or manager.

If you do negotiate to have the account listing removed or modified, make sure you get the agreement in writing. 

How Many Points Can My Credit Score Increase if a Collection Is Deleted?

When collection accounts get removed, credit scores can increase. In other words, as long as collection accounts stay on your credit report, they can hurt your score. 

How much your credit score will go up depends on a number of different interlocking factors. Late payments and collection accounts make up 35% of your FICO score, though, so removing a collection account can often achieve a positive result. 

If you’re not able to get a collection account removed, don’t despair. The older the account gets, the less it’ll affect your score—and after seven years, it’ll likely vanish.

How Long Does It Take for a Paid Collection to Come Off Your Credit Report?

Collection accounts stick around for about seven years after the last payment date on your delinquent account. Remember—every time you make a payment on your collection account, that timer resets, so if you do intend to settle a genuine debt, do so as quickly as possible.

Payments that are 30 or 60 days late won’t generally affect your credit score as much as payments that are more than 90 days past due. If possible, catch up with your payments within a month or two—and certainly before your account goes to collections.

The post How to Remove Collection Accounts from Your Credit Reports appeared first on Credit.com.