4 Ways To Remove Collections From Your Credit Report

A collection account will lower your credit score and can generally stay on your credit report for up to seven years. Often, a collection entry will even keep you from getting a mortgage or securing an auto loan, which is why it’s important to do all you can to remove collections from your credit report quickly.

To be clear, you can pay a collection and still have it shown on your credit report. The credit reporting bureaus can just change the account to a “paid collection.”

Fortunately, it is possible to remove collections from your credit report.

Here are 4 ways to remove collections from your credit report, improve your score, and restore your borrowing power:

Request a Goodwill Deletion
Dispute the Collection
Request Debt Validation
Negotiate a Pay-for-Delete

1. Request a Goodwill Deletion – If You Have Paid The Debt

The first step, if you have paid the full collection account, settlement, or have been making regular on-time payments, is to mail the collection agency a “goodwill letter” that explains your situation.

Don’t go into too many details, but let the debt collector know if you’re trying to buy a house but can’t because of the negative information on your credit report.

Then kindly ask the debt collector to remove collections from your credit report out of goodwill.

With some newer scoring models of FICO and VantageScore, they ignore a collection marked as “paid”, though many lenders still utilize older formulas that will still weigh a paid collection account against you.

If this sounds overwhelming, you might want to reach out to a credit expert.
It costs some money but is less expensive than you might think
considering you are getting your own lawyer to fight on your behalf.

Talk to Lex Law

2. Dispute the Collection – If You Found An Error

If the goodwill letter falls flat and the debt collection remains on your credit report, it’s time for a more advanced method.

For this, you will need a current copy of your most recent credit report. TransUnion, Experian, and Equifax provide you with a free credit report once a year. You can also apply for a free weekly credit report on AnnualCreditReport.com.

Once you have your credit reports, find any negative items you’d like removed and make note of them.

Confirm all the details and if you see anything inaccurate, report the inaccurate information to the major credit reporting agencies.

The Fair Credit Reporting Act (FCRA) requires credit reporting agencies to show only accurate information about your credit history.

If you can find inaccurate information, the credit bureau will have to fix the information. Though, if it can’t fix the errors, the bureau should remove the collections from your credit report.

This method can work because, rather than simply disputing the entire entry, you are going to write an advanced dispute letter that lists especially what is inaccurate.

Using this letter, you will insist that each piece of information is corrected or that the collection be removed.

This makes it more difficult for the credit agencies to verify the collection and hopefully results in them simply removing the collection altogether.

ITEMS ON THE COLLECTION ENTRY TO CHECK FOR INACCURACIES:

Balance
Account number
Date opened
Date closed
Account status (e.g., Closed)
Payment status (e.g., Collection)
Payment history
Delinquency date
Credit limit
High balance
Addresses
Anything else that appears to be inaccurate

3. Ask the Collection Agency to Validate the Debt

If you can’t find inaccuracies on your credit reports, write to the collection agency and ask it to validate your debt.

Under section 809 of The Fair Debt Collection Practices Act, collection agencies are required to validate debts they are attempting to collect, if you request that they do so.

The main issue here is that you have only 30 days to make the request after the collection agency first contacts you.

If they are unable to validate the debt, you can ask them to remove it from your credit report.

4. Negotiate a Pay-for-Delete Agreement

When your original creditor can’t collect your past-due balance, it’ll sell your debt to a debt collection agency which means you now owe the money to the agency.

But when the agency buys your debt, it doesn’t pay the full amount. It may pay only a fraction of what you owed on your original debt.

If the collection agency can get you to pay off the debt, it makes a profit. As a result, you could leverage a payment in your negotiations.

How to Negotiate a Pay-for-Delete Agreement

You offer to pay part of your balance due in exchange for getting all negative information related to the debt off your credit report.

For this to work, you have to get this agreement in writing. An agreement over the phone won’t hold up. You could do your part and pay the agreed-upon amount only to learn the agent you spoke with didn’t make a record of the deal.

Now, if you owe $30,000 on an old credit card charge-off, you’d have a hard time coming up with a lump sum so large. Even 30 percent would still be $9,000. But this pay-for-delete strategy can help when you can afford to make a payment.

Late payments can be reported separately even though it’s associated with the same debt. Though, if you negotiate with your creditors to get a collection account removed, be sure all the negative data goes away.

Have a Professional Remove Collections From Your Credit Report

If this all seems like too much for you to handle, and you are worried about trying to take on a collection agency on your own, there’s an entire industry devoted to credit repair that is ready to help you.

A professional credit repair company like Lexington Law could help restore your credit — usually within three or four months. They won’t take any action you couldn’t take yourself. Since credit repair is all they do, it’ll work faster and more efficiently.

You would need to budget some money for the monthly payments, which average about $100 depending on the plan you choose. There’s also a one-time set-up fee for most credit repair companies.

But if you want to get your personal finances back on track without spending your free time on the phone or writing letters, you should consider this kind of service provider.

What You Need to Know About Debt Collections

Debt collections come in many forms. Whether it’s an unpaid medical bill, a cell phone bill, or even an $18 library book you never returned, unpaid debt can lead to negative information on your credit report.

It looks especially bad when the negative item comes from a collection agency. Collections accounts tell other creditors you let an old debt go three or maybe even six months without paying.

When you apply for new credit, lenders know your old lenders lost money on your accounts. So a collection account will have a negative impact on your ability to apply for new credit — whether it’s a mortgage, a major credit card, or a personal loan.

Original Creditor Vs. Collection Agency

Sometimes the same debt can appear twice on your credit report, which can multiply its negative impact.

For example, this can happen when the original creditor sells the debt to a collection agency, which then reports the same debt to the major credit bureaus.

When you’re struggling to make on-time payments, try to resolve the debt before it goes into collections, if possible.

Many lenders have relief programs, flexible payment options, or even programs allowing you to skip a payment.

If you’re already being contacted by a debt collector, it’s too late to fix the problems with your original creditor.

But you can still resolve the issue using one or more of the options above.

Collection Agency and Credit Report FAQ

How Does A Collection Affect Your Credit Score?

Once a debt turns into a collection account and gets logged on your credit report, you will see a significant drop in your credit score.

If you didn't have any other negative items on your credit report, this drop could be north of 100 points.

How far your credit score falls largely depends on how bad it was, to begin with.

In other words, a single collection account won't be a huge deal to someone who already has multiple delinquent accounts and a consistent string of late or missed payments, even on their up-to-date accounts. This person already had bad credit.

But if you've established a long history of making on-time payments, keeping a healthy credit utilization ratio, and maintaining a blend of different types of credit, a collection account will make a huge negative mark.

As the collection account ages, its impact on your credit score will lessen. But this won't help if you need new credit this month.

How Long Does a Collection Stay on Your Credit Report?

Unfortunately, unpaid collections and paid collections remain on your credit report for seven years.

Over time, the negative impact of your collection account will diminish.

After a few years, you may be able to get an auto loan, credit card, or mortgage again, but the best interest rates go to the best-qualified borrowers.

You could save thousands by getting the collection account removed and fixing your bad credit as soon as possible.

When You Pay A Collection Account Will It Be Removed From Your Credit Report?

A lot of people think paying a collection will automatically remove it from their credit report, like my old Sprint bill.

It's important to know the collection won't be removed from your credit report even if you pay it off.

It'll just be relabeled as a paid collection instead of an unpaid collection.

New lenders will still see the collection account when they pull your credit report.

Even if you do get approved for a loan, you'll likely pay a higher interest rate.

Read more above on how to get a paid collection off of your credit report.

Are Medical Collections Different?

For years, medical collections were treated the same as all other collections.

But FICO has updated its scoring to treat medical collections differently. Medical collections now carry less weight when your credit score is calculated.

The newest FICO scoring model puts even less emphasis on medical debt.

Again, this doesn't mean a medical collection won't affect your ability to get a loan. Lenders don't just look at your credit score to make their loan decisions.

They usually pull your entire credit report and notice your past negative items. This, in turn, will affect your approval as well as the interest rate.

This is especially true when you're applying for a mortgage.

How Do I Get A Copy of My Credit Report?

Until further notice, you can get a free credit report every week because of the Covid-19 pandemic.

Visit AnnualCreditReport.com to get your free credit report.