How to Remove Collections from your Credit Report
We all forget to pay a bill now and then. But if you fall seriously behind on a payment, the lender may send your account to collections, resulting in a mark that could remain on your credit report for years. The damage this can do to your credit score is significant, but not irreversible. Sometimes, you can negotiate your way to a solution. And, as always, be sure to check your credit report to make sure all the information on it — including the account in collections — is accurate and on the level.
Removing collections from your credit report may be possible, and you have a few options. While an account in collections can affect your scores for years, it’s possible to dispute the negative mark if it was made in error. It also may be possible to negotiate a payment amount and have the account removed from your credit report. But first, let’s look at how collections affect your credit.
Collections and your credit report
The good news is that temporarily forgetting a payment or two probably won’t send your account to collections. Most accounts passed along to collections are seriously delinquent and more than 30 days late. The bad news is that an account in collections can remain on your credit report for up to seven years and seriously drag down your credit score.
Unfortunately, simply paying off the account won’t make the notation drop off your report any sooner. It will, however, add a positive mark to your credit history. The collection account entry on your report will be updated to show it was paid in full. Once paid, the account may have less of a negative effect on your credit score.
Your first step toward addressing an account in collections is getting a copy of your credit report. You are entitled to one free credit report from each of the three major credit bureaus every 12 months. You can get your free report at AnnualCreditReport.com. Once you have it, you’ll be able to see details about the account and any potential errors.
Dispute collections placed on your report in error
When you get that copy of your credit report, you may find that a few things just don’t look right. It’s possible that errors on your report could be dragging down your credit score. For example, you might find a collections account that should no longer be on your report, or even debts you never took on.
Don Petersen, a consumer protection lawyer in Florida, noted that these kinds of issues are common. “All they’re going to get is an account and the balance,” he said. “They might mess up that balance.” The best way to avoid these errors and dispute them with confidence is proper documentation. “[Consumers] really just need to sit down and go through a lot of details,” he adds.
Negotiate with the creditor
If you think you might be able to repay part of the debt, it’s worth exploring negotiation. Negotiating a solution with a creditor to pay back your debts will help you reduce the damage on your credit report, and possibly help avoid an account from going into collections in the first place.
First, take a look at your finances and figure out what payment you can reasonably afford. Then, decide how to settle the debt — whether you’re reducing or deferring the amount you owe, your payments or lowering the interest rate. Contact your creditor and propose these figures, explaining your financial situation. Remember to get your agreement in writing, and ask how this will appear on your credit report.
A word of caution: Before you propose a repayment plan with your creditor, check out the statute-of-limitation laws in your state that dictate when you can be sued for overdue debt. If you pay a creditor a partial payment, it could extend how long that negative information remains on your report. Consider these laws and the age of the debt before proposing a settlement. Additionally, once you’ve reached an agreement, make sure to get it in writing.
Negotiate with the collector
If the debt has been sold to a collections agency, you will have to negotiate with the collector at the collections agency, rather than the original creditor.
Negotiating with a collector can be easier than negotiating with a creditor. The collector typically purchases the account for far less than you owe, so they can still make a profit even if you don’t pay the full amount owed. In other words, they may have more wiggle room for negotiating, and may be more likely to settle for less than the full amount.
When you negotiate with a collector, you can try adding the stipulation that they delete the collection from your credit report. This is sometimes called “pay for delete.” Keep in mind that the collection agency has no obligation to agree to grant your request. Conduct all requests for this compromise in writing.
Renegotiate when collections change hands
Debts are sometimes bought and sold, and that can provide a new opportunity to negotiate or renegotiate and ask for the account to be removed from your report. To see if your collections account has been transferred, check your credit report. It should show what collector now has the debt, as well as past collection agencies and the original creditor. Even if the last collector wasn’t as willing to work with you, it may be worth negotiating again once the debt has changed hands.
Ask for a goodwill deletion
You might consider requesting a goodwill deletion if you’ve dealt with a crisis (like a medical emergency or a natural disaster) that caused you to miss a payment, or another similar extenuating circumstance. You can make a case to the collection agency (or more likely, the original creditor) as to why the collection account should be removed from your report. This is probably not a method to depend on. “It’s a business decision on their part,” Petersen said.
But, it could be worth a shot if you’ve honestly dealt with a problem and need any help you can get.
Beware of “re-aging”
Keep an eye on your credit report to make sure the collection account disappears after the designated time period. Shady collectors will sometimes buy old debt and “re-age” it by falsifying the date on which it was initiated. This is a violation of the Fair Credit Reporting Act. If you find a re-aged debt on your report, write a dispute letter to the credit reporting bureaus. Unless the creditor can verify that the debt they reported is new debt, it should be removed. However, it’s not all that common anymore. “About 30 years ago, this was a bigger issue,” Petersen said. “Usually, when people come to me reporting re-aging, they’re looking at the wrong date.”
The bottom line
Depending on what you find on your credit report, it’s worth taking steps to resolve whatever issues you can. You should be able to do everything outlined in this article on your own, but if you feel the hole you’ve dug is simply too deep, consider working with a reputable credit repair service. If you do, know that credit repair companies can’t do anything that you can’t do yourself. Either way, be realistic about your debts, and avoid this situation in the future by budgeting and staying on top of payment schedules. And bear in mind that even having an account in collections won’t doom your credit score forever.