Maintaining a good credit score and clean report is crucial for a healthy financial life. However, there are instances when bad habits or difficult financial circumstances make it difficult to keep your credit score high.
One of the most common issues facing those with less than ideal credit is a collection account. When a debt remains unpaid for a significant period of time, the original creditor may sell the account to a debt collection agency. When that occurs, the collection account is a serious drag on your credit score.
While it may seem daunting to create a plan for removing a collection account, it is an important first step to repairing your credit. Several strategies can help clean up your credit by removing collection accounts from your credit report, but you have to know where to start.
Below are the options for repairing your credit through collections removal:
Know Your Credit
Before starting to remove collection accounts from your credit reports, you first have to know what information is listed on each report. These details are found in credit reports from the three major credit bureaus – Equifax, Experian, and TransUnion.
Each credit agency may have different information about collection accounts reported from creditors, so you should pull a report from each bureau at least once per year. You can either visit each credit bureau online and request a report, or you can use annualcreditreport.com’s online tool to request a copy of your reports from all three. The service is free once every 12 months.
Within your credit report, you can identify any accounts that have fallen into collections. Each entry offers details about the collection agency, its contact information, when the default was reported, and the balance owed. Having this information on hand make the process of removing collection accounts much easier.
Once you have your credit reports and information relating to any accounts in collections, you can start to determine if the details in each entry are valid. Because credit reporting agencies receive so much data from hundreds of thousands of creditors for millions of consumers, errors are common.
The most common complaints among consumers when it comes to credit reporting is the inclusion of erroneous information from debt collection agencies, according to Fred Williams, author of the book Fight Back Against Unfair Debt Collection Practices.
“The most recent statistics show that one out of five people who complained about their credit report said it contains information that does not even belong to them,” Williams says. He encourages those who find errors in collection account reporting to follow through with the dispute process.
When a collection account is reported in error, a dispute can be submitted either in writing or online with each of the three major credit reporting agencies. The dispute process allows the credit bureau to review the inaccurate account, reach out to the collection agency reporting it, and validate that the account is indeed an error. When this information is verified, the collection account is removed from your credit report. It is important to remember to check each credit report thoroughly for errors and dispute any entries with each agency independently.
If the collection account is valid, you have other remedies for getting it removed, including paying for the balance, paying for removal, or requesting a goodwill deletion. Here are several tips for each option:
In some cases, disputing a collection account does not result in a removal. When the debt is valid, payment may be a viable option. That does not mean, however, that you must pay the full amount owed. Collection agencies often accept a portion of the debt as repayment.
Work directly with the debt collection agency to negotiate an amount that works for your budget by calling them. While paying off the collection account will not automatically remove it from your credit report, it will give you an opportunity to ask for it to be removed once the balance is eliminated.
Some debt collection agencies do not take requests for removing collection accounts from your credit reports. Instead, they may recommend contacting the original creditor. You’ll likely need to do this in writing, with documentation that you paid the debt. If the original creditor or the debt collector agrees to remove the account, be sure to get the agreement in writing.
Pay for Removal
As an alternative to paying for the collection balance, whether the original amount or the negotiated lower amount, you may have an option to pay for removal. This process involves an agreement with the debt collector to have the account removed after receiving payment.
While pay for removal may be an option, it’s rarely successful. Credit bureaus and regulatory agencies have tried to crack down on this practice to keep consumers safe from unfair debt collection practices. If a debt collection agency agrees to process a pay for removal, do not submit payment until the agreement is in writing. Also, be sure to check your credit report after making payment to ensure the collection account was removed.
Another option for removing collection accounts for your credit reports is a goodwill deletion. When a collection debt has been paid or negotiated down, you can ask the debt collector for removal from your credit reports. A goodwill deletion is only suggested when you do not owe a balance on the debt.
Write a goodwill letter to explain your circumstances, and send it certified mail to the debt collection agency. Be polite and truthful in your explanation as to why the debt was in collections or why it is necessary to remove it now. While there is no guarantee this will result in the removal of the collection account, it does not harm to try.
Statute of Limitations on Collection Debts
If removing collection accounts through disputes, payment, or goodwill deletions does not work, the good news is that there is a statue of limitations on collection debts. Although these vary by state, debts like those in collections fall off your credit report after seven years. If the original debt was incurred beyond the seven-year mark, debt collectors might not have a leg to stand on when trying to collect.
However, if a judgment is filed in court, the seven-year timeframe may not apply. This means that debt collectors or the original lender has brought a lawsuit against you, and this may bring the date of the debt current. A judgment may restart the clock, making other means of removing collection accounts a more reasonable approach than waiting seven years.
Removing collection accounts from your credit reports can seem like an impossible challenge, but following the tips above can make the process far easier. Start with disputing erroneous information related to collection accounts on each credit report, and follow up with payment negotiations when needed.
After a debt has been paid, a goodwill deletion may be your best course of action. Remember that negative entries like collection accounts stay on your credit report for seven years, so waiting may also be an option. Following through with these strategies can help you rebuild your credit score over time by removing collection accounts effectively.