How and Why to Get Collections Removed from Your Credit Report

get collections removed from credit report

By Janet Berry-Johnson, CPA

Maybe you want to finance a new vehicle, buy a home, apply for a job and know that a credit check is part of the employer’s screening process, or just want to improve your credit score for kicks. Yet there’s a major roadblock in your way ... collections on your credit report.

Having collection accounts does hurt your credit score, but it’s a challenge you can overcome if you know how they ended up on your credit report in the first place and how to remove them from your record – no costly credit repair services required.

How does debt end up in collections?

Collections accounts can stem from unsecured accounts, such as personal loans, student loans and credit cards. They can also come from other accounts, such as medical bills or utilities.

When a credit card or loan becomes seriously past due, the creditor may refer your account to their internal collection department, hire a collection agency to try to collect the debt on their behalf or sell the debt to a collection agency.

If your debt is turned over to a collection agency, your original lender will stop trying to collect the debt from you. Instead, the collections company will try to pursue the debt to collect the money.

How do collection accounts impact your credit score?

Once your debt is turned over to a collection agency, the original account appears on your credit report as a “charge off,” and the collection account is reported separately on your credit report.

The degree to which having an account reported as in collection hurts your credit score depends on how high your score was when the collection was reported and the amount owed. If you have good credit, a high balance collection can drop your score significantly, possibly putting you in the bad credit range. If your credit score is already low due to late payments and other negative information, the impact may be negligible.

No matter the immediate impact, collections, like most negative information, remains on your credit report for up to seven years from the date the debt first became delinquent and remained unpaid. While that impact declines over time (since new information on your credit report carries more weight than old data), as long as collections appear on your credit report, they can drag down your score and make it difficult to obtain new credit with favorable interest rates and terms.

How can you have collections removed from your credit report?

The first step toward getting collections removed from your credit report is to undersand how to read your credit report so you can identify whether there are any collections items there.

You can order a free copy of your credit report from each of the three credit reporting agencies once every 12 months by going to AnnualCreditReport.com. Review your credit report for accuracy, making sure you recognize all of the information on your credit report, including names, addresses and accounts. Accounts that have gone to collections may appear twice – once as a charge off from the original creditor and a second time with the collection agency.

Now, the path for getting collections removed from your credit report depends on whether or not the information is accurate.

If the collection is an error...

Erroneous collections on your credit report can take several forms:

  • Old debt
  • Mistakes
  • Accounts that don't belong to you

Old debt

Delinquent accounts should fall off your credit report after seven years from the date they first became delinquent. If a debt has lingered on your credit report longer than it should, dispute it with the credit bureau in writing. Consider using a dispute letter template for this.

Mistakes

If you paid off an account and it is still showing as unpaid, gather documentation supporting the payoff and file a dispute with the credit bureau. Keep in mind, if the account was paid off recently, it might take a while to see the updated status on your credit report. Learn more about fixing errors on your credit report.

Accounts that don’t belong to you

If you believe the debt is not yours, ask the collection agency to validate the debt. Collectors are required by the Fair Debt Collection Practices Act to send you a written debt validation notice within five days of their first contact with you.

The validation letter should include the amount owed and the name of the original creditor. If the debt is not yours, the collection should be removed from your account.

Each of the three credit reporting companies, Experian, Equifax and TransUnion, provide instructions on their websites for disputing inaccurate information.

Typically, you can start a dispute online or by sending a letter to the credit reporting company. Either way, you’ll need to explain what information you think is inaccurate and request that it be removed or corrected. The FTC has a sample letter you can use.

Attach copies of any documents that support your dispute. If you send the dispute in writing, send the letter by certified mail, with a return receipt requested. The credit reporting company has 30 days to investigate and send information about your dispute to the creditor. If the creditor finds the disputed information is inaccurate, they are required to notify all three credit reporting companies to correct the information in your file.

Once the investigation is complete, the credit reporting company will give you the results in writing and a free copy of your updated credit report.

If the collection is correct...

Unfortunately, negative information on a credit report isn’t always the result of a mistake. If the collection information is accurate, having it removed is not always possible, but here are a couple ideas to try:

Ask for a goodwill deletion

If you already paid the debt, ask the creditor for a goodwill deletion. Write the creditor a letter (known as a goodwill letter) explaining your circumstances and why you would like the debt removed. For example, you could explain that the account went into collections after you lost your job, but you’ve since brought the account current and made on-time payments, and are working on rebuilding your credit so you can buy a home. There is no guarantee the creditor will remove the collection, but it doesn’t hurt to ask.

Ask for a pay for deletion

If you haven’t yet paid the debt, you may be able to negotiate with the creditor to remove the collection from your credit report after being paid in full or settling for a lower amount. Again, this isn’t a foolproof plan, but it’s worth a try.

If you do go this route, make sure you get the agreement in writing from the collection agency before making a payment. Otherwise, you have no recourse if the creditor doesn’t hold up their end of the bargain. The myFICO Forum has a good example of a pay for deletion letter.

Keep in mind, even if a collection is removed from your record, late payments and charge offs that led to the collection will remain on your credit report for seven years. Still, when it comes to credit scoring factors, paying off outstanding debt is always better than not paying it.

How can I avoid getting debt sent to collections in the future?

The best way to avoid having collections drag down your credit score is, of course, to prevent them in the first place. Make every effort to pay your bills on time and avoid missed payments since payment history is the most important factor in your credit score.

Set up reminders on your calendar or take advantage of auto payments so you don’t accidentally miss a due date. This applies to credit card and loan payments as well as utility bills, medical and service providers, and even landlords.

Remember, not only does positive payment history help keep your debt from going to collections, it also counts for 35% of your FICO credit score.

If you are having financial difficulties and can’t make your payments on time, communicate with your creditors. Let them know about your situation. Many creditors have programs designed to help borrowers in such circumstances.

Should you hire a credit repair company?

Trying to repair your credit on your own can be challenging and time-consuming. It often involves piles of paperwork, letters and phone calls. That’s what makes credit repair companies who promise to repair your credit for a fee so appealing. But keep in mind, a credit repair company can’t do anything that you can't do on your own.

Unfortunately, credit repair scams are somewhat common. If you do decide to outsource the work to a credit repair company, the FTC recommends avoiding companies that:

  • Insist you pay them before they do any work on your behalf
  • Tell you not to contact the credit reporting companies directly
  • Tell you to dispute accurate information on your credit report
  • Tell you to provide false information on applications for credit cards or loans
  • Don’t explain your legal rights when telling you what they can do for you

Bottom line

There are times when bad habits or difficult financial circumstances lead to having collections show up on your credit report. While it may seem daunting to have negative information removed, following the steps above – and taking other steps to handle your credit responsibly – can help you build your credit and get you on the path to a healthy credit score.

About the author

Janet Berry-Johnson is a Certified Public Accountant and personal finance writer. Her work has appeared in numerous publications, including CreditKarma and Forbes.

Written on June 18, 2019

Self is a venture-backed startup that helps people build credit and savings.
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Disclaimer: Self is not providing financial advice. The content presented does not reflect the view of the Issuing Banks and is presented for general education and informational purposes only. Please consult with a qualified professional for financial advice.

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