It can be quite upsetting to have one or more collection accounts on your credit report. You know that it's having a negative impact on your credit score. And on top of that, these accounts can stay on your report for seven years. The good news, though, is that as time goes by, the impact is less and less.
But still, it's understandable that you'd want to get rid of it instead of waiting out the time period. There are some steps you can take, but it's not as easy as some websites would lead you to believe. The first thing to do is check your credit reports for accuracy.
How to Get your Free Credit Reports
You can get your free reports from AnnualCreditReport.com. This is the official site authorized by Federal law. Every 12 months, you're entitled to a free credit report from the three major bureaus: Equifax, TransUnion, and Experian. Usually, it's best to spread them over the course of a year and request one every four months or so. But when you have a problem to resolve, you need to see what's listed on all three reports.
If you find the information is incomplete or inaccurate, that's important ammo to have when you talk with the collector. If the item is listed in error, then you can dispute this with the credit reporting agencies.
Be sure and check the date, too. If the account has been reported for over seven years, then it could be an error that it's still on your reports. Also, if the collection agency can't verify that your collection account is accurate, then the credit bureaus must remove it.
As you can see, taking the time to review your reports could be very beneficial. But if the information is accurate, at least you'll know how much time is left before the item will be removed.
Does Negotiating with the Collector Work?
Often, a consumer will try to negotiate by offering to pay the sum that's owed in exchange for deleting the negative item from the credit reports. Sometimes, this works. But don't count on it.
The issue is that collection agencies aren't really supposed to do this. They have a contract with the credit agencies that prevents this practice. So please remember that while this happens, it's not commonplace at all. That's because your credit report is a history of your credit activities. And removing legitimate items makes your report inaccurate.
But if the account ended up in collections because you were arguing the legitimacy of the bill with the lender, that's a little bit different. In those circumstances, it might be possible to pay and ask to have the delinquent account removed from your reports.
But before you pay, get the collector to put this agreement in writing. After you have that, you can pay the bill.
What Happens When you Pay the Bill in Full?
Before you pay the bill, ask the collector to agree to note that your debt is "paid in full" on your credit report. Sometimes, debts get resold and so be sure you have documentation to show the account was paid.
Unfortunately, paying off the debt doesn't change anything in terms of the impact on your score. The account will stay on your reports until the seven years has passed. But potential lenders will see that you made good on the debt and that's important.
And as mentioned already, do keep track of the date so you can confirm when it's gone from your reports. If it's still there, you can dispute this with the bureaus. Pinpointing the exact date can be tricky, but with credit card accounts, the date usually starts when the account is 180 days past due. The seven-year time period starts on the date you defaulted on the account. So if you defaulted on a credit card account in July 2009, then it should be removed in July 2016.
Your Next Steps
While the debt is still on your reports, you can take steps to recover from this. Try not to panic and focus on keeping all of your bills current. Use credit responsibly, which also means keeping low balances on your cards. This keeps your credit utilization ratio below 30 percent. To help your score even more, keep it below 10 percent.
Each year, the FICO score gives less weight to the delinquent account. So there really is light ahead!