4 Steps To Remove Collections From Your Credit Report
A collection account can lower your credit score, and can generally be listed on your credit report for up to seven years. Frequently, a collection entry will even prevent your approval for any home mortgages or auto loan.
The credit reporting agencies can adjust your account to a “paid collection.”
It is possible to remove collections from your credit report.
Make sure each type of collection on your credit report has been removed, and your credit score will improve. Look at your borrowing power after removing each type of collection on your credit report.
1. Request a Goodwill Deletion – If You Have Paid The Debt
The first step is to mail the collection agency a “intention to waive debt” letter that explains your situation.
But let the debt collector know if you intend on buying a house but are unable to do so due to negative information on your credit report.
Then ask the collector to remove collections from payments from yourself as a goodwill gesture.
New scoring formulas of FICO and VantageScore classify a collection which has been marked as paid just like other unpaid collections in weighing your creditworthiness.
If this sounds inconvenient for you, you may want to reach out to a financial advocate. It costs some money but is less expensive than it might seem when you consider how much lawyer you’re getting for yourself.
2. Dispute the Collection – If You Found An Error
If a letter disputing a goodwill assertion fails and your overdue debt remains on your report, it’s time for a more sophisticated approach.
For this, you’ll require the current copy of your credit history. TransUnion, Experian, and Equifax provide you with a free credit report once a year.
Once you have your credit reports in hand (or on your screen), identify the negative item you’d like removed and assess it closely.
If you notice any inaccuracy, make sure to report it to the major credit reporting agencies.
The FCRA requires you to only present accurate information about your credit history to credit reporting agencies.
The credit bureau will have to repair or delete information from the erroneous items on your credit report, if possible. Regardless of whether credit-reporting errors can be fixed, the bureau must remove the negative entries from your record as needed.
Given that you are going to list specifically what is incorrect in the dispute letter rather than arguing the entire entry, this method can be effective.
You can use this letter to ask that inaccuracies be fixed or that assets be removed.
This makes it harder for credit agencies to confirm that the collection is legitimate and, therefore, probably will lead them to simply erasing the collection.
CHECK FOR INACCURACIES: ITEMS ON THE COLLECTION ENTRY TO BE SURE OF:
- Account number
- Date opened / Date closed (check all dates)
- Account status (e.g., Closed)
- Payment status (e.g., Collection)
- Payment history
- Delinquency date
- Credit limit
- High balance
- Anything else that appears to be inaccurate
3. Ask the Collection Agency to Validate the Debt
If you cannot find mistakes on your credit reports, write to the reporting agency and discuss the issues.
Under section 809 of The Fair Debt Collections Practices Act, collection agencies are required to validate the debts they are trying to collect, if you request that they do so.
The primary issue is that you have only 30 days after your initial contact with the collection agency to make your request.
If they are unable to confirm the legitimacy of the debt, you can ask them to remove it from your credit report.
4. Negotiate a Pay-for-Delete Agreement
When you’re unable to reach your previous-due balance with your original creditor, that creditor may sell it to a collection agency which you owe the money to.
If the collection agency buys your debt, it does not pay the full amount. It may only pay a small percentage of what you owed on the original mortgage.
If the collection agency can pay off the debt, it makes a profit. As a result, you may be entitled to a cash discount in negotiations.
If I had not paid my Sprint fee in full, it could have saved me a lot of aggravation.
HOW TO NEGOTIATE A PAY-FOR-DELETE AGREEMENT
You elect to make a partial payment in exchange for canceling all the negative information related to the debt from your credit report.
Negotiate to pay back 30 percent of old debt, for example.
For this procedure to work, you need to write down this agreement. Unless it is in writing, a phone conversation will not work.
You could do what you have agreed upon and only learn the administration of your agent didn’t make a record of the contract.
Now that you owe $30,000 on an old credit card charge-off, you’d have a difficult time coming up with a lump sum as large as $30,000. Even 30 percent would be $9,000.
This pay-for-delete strategy can be a help to you if you can afford to make a payment.
Late payments can be reported separately even though it’s related to the same debt.
If you have your request accepted, be certain that the negative data is completely deleted once you finish the negotiation with your creditor.
Have a Professional Remove Collections From Your Credit Report
If you think all this is too much to handle, and you are worried about managing a collection company on your own, there is a whole industry devoted to debt repair that can assist you.
A professional credit repair company like Lexington Law could help you repair your credit — usually within three or four months.
Instead of doing what they could not, they’ll work for you faster than anyone else. Since credit repair is all they do, it will work best and faster than anywhere else.
You need to budget a certain amount of money per month for payments, which average about $100 depending on your payment plan.
You may have to pay a one-time set-up fee before working with the majority of credit repair companies.
If you don’t want to get your personal finances on track by writing letters and calling on the phone, you should consider hiring a company that offers such assistance.
What You Need to Know About Debt Collections
The types of debt collections can be numerous.
Unpaid medical bill, cell phone bill, or an $18 book at the library are three cases when unpaid debt can have a negative impact on your credit rating.
When negative product comes from a collection agency, it looks particularly bad.
Collections accounts inform other creditors that you let an old debt go 3 or perhaps even six months until it finally fell due.
When you apply for new credit, previous lenders are aware of how much money was lost on your record.
A collection account will make it harder for you to get a new loan, whether it’s a mortgage, credit card, or a personal credit line.
Original Creditor Vs. Collection Agency
The same debt may appear twice on your credit report, which can increase its negative impact.
For example, this may happen when the collector sells the debt to a collector, which reports the damage to the major credit reporting agencies.
If you can’t make your payments on time, try to settle your debt early so it won’t go into collections.
Many loan providers have assistance programs, flexible payment options, or even programs allowing you to skip a payment.
If you aren’t simply being contacted by a debt collector, it’s too late to address any problems with your initial creditor.
But you can still solve the problem by applying one or more of the solutions above.