If you have ever wondered whether or not you can remove collections accounts from your credit reports, you have landed on the right page. The answer to that question is, yes, it is possible to remove collections from your credit report by filing a dispute. Filing your dispute as soon as possible is imperative because the effect of an account in collections status can drastically lower your credit score. Luckily, collections on your credit reports are not permanent. Suppose any of the information regarding the collection that is being reported is unfair or inaccurate and can’t be verified as 100% correct. In that case, you can dispute the collection item to have it removed from your credit reports.
If the account in question is being reported accurately & fairly, you can attempt to negotiate directly with collection agencies to get the collection removed from your credit.
Below are your options for removing collections from your credit report:
Option 1.) File a Dispute with the Credit Bureau
Thanks to the Fair Credit Reporting Act (FCRA), every consumer is entitled to fair and accurate credit reporting. Credit repair services, which involve disputing unsubstantiated or inaccurate data on your credit report, are often the best strategy to remove a collection account if it is inaccurate in any way.
Below are the steps you’ll need to take when filing a dispute with the credit bureaus.
- Review all three of your credit reports to see if there are any inaccuracies. These can include the same debt being reported multiple times, accounts that do not belong to you, the wrong collection agency listed on your credit report, and debts that should have fallen off of your credit report due to the statute of limitations.
- Collect evidence related to the reporting inaccuracy. This evidentiary documentation is necessary for the credit bureaus to investigate the credit-reporting error.
- Report the misinformation to the credit bureaus. Send a well-written letter including information verifying your identity, fine details demonstrating the inaccuracy, and supporting documentation.
- Wait for the credit bureaus to respond with their investigation results. By law, the credit bureaus must investigate your credit dispute and report their findings in writing within 30 days. They will reach out to the debt collection agency to verify the disputed information.
If the debt collector does not respond or cannot substantiate the information in which they are reporting to the credit bureaus, the inaccurate account must be deleted.
However, the collection account will remain on your credit reports if the debt collection agency can genuinely verify the information.
You can also pursue several other options to remove collections from your credit in the event credit bureaus find it fairly and accurately reported.
Option 2:) Write a Pay-for-Delete Letter
A pay-for-delete letter is a negotiating tool used to get negative information deleted from your report in exchange for full payment.
Please keep in mind debt collection agencies are not obligated to accept this type of offer. If they agree, make certain to get all details in writing to hold them accountable.
Option 3: Request a Goodwill Deletion
This request is sent to your original creditor, requesting them to remove a negative account out of goodwill. Typically, this works best if you otherwise have a positive history with your creditor.
What Happens When my Debt is Assigned to Collections?
Being sent to collections indicates the original creditor has ceased trying to collect a debt that a consumer owes. This generally happens after 180 days of non-payment. Typically the lender will sell the negative account to a debt collection agency to recoup some of their lost money.
Once a debt is sold to a debt collector, the agency begins efforts to contact you for payment. Seldom, collection agencies won’t report the debt to the credit bureau if paid in a timely manner.
Regardless of your situation, remember that if a collection agency contacts you, you have rights under the Fair Debt Collection Practices Act.
How Do Collections Affect My Credit Score?
According to Experian, a collections account on your report makes an enormous impact on your score and your credit history. All potential moneylenders will see that you failed to pay your debt for such a long time that a creditor had no choice but to refer your account to a collections agency, no matter what your circumstances were at that time.
This is a glaring red flag for anyone evaluating you as a credit risk. It conveys a message to lenders that you cannot be trusted to repay your debts.
Will Paying Off a Collection Raise My Credit Score?
Paying off a collection account alone does not raise your score and most certainly does not automatically delete the item from your credit report. In fact, paying off a collection doesn’t typically change how quickly it comes off your credit reports.
Paid collections will typically stay on your credit reports for seven years from the date the account was initially reported past due. For as long as a collection account remains on your credit report, it will have a substantial negative impact on your credit score. The severity of this impact lessens over time until it finally falls off after about seven years.
It goes without saying, it’s best for your credit score and your finances to avoid collections when possible. Below are a few steps you can take to prevent collection accounts:
- Track your spending to generate a monthly budget and cut down on avoidable expenses. There are a slew of budget-tracking resources you can find on the internet, and many of them are free or freemium.
- Consider debt consolidation if you’re having trouble keeping up with making your minimum payments on-time.
- Attempt to negotiate with your creditors before your account is assigned to collections. If you cannot make your minimum payments for a good reason, contact the creditor and politely explain your case. You will never know until you at least try — and this is something unquestionably worth trying. Your creditor may be ready and willing to negotiate a new payment plan with you, allowing you to avoid being transferred to the collections department or even reporting a charge-off on your account.