Removing Collections From a Credit Report

Written by on January 2, 2013 in Money - No comments | Print this page

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credit-wordOccasionally, through oversight or a tight spot in your finances, a bill may be turned over to collections. You might not know about it until you try to get your annual credit report, or you apply for a loan or a large purchase such as a house or car.

Sometimes, even if you have paid the debt, the collection is on your record, giving any creditors looking over the report pause. Here is some information to get you started on removing the stain of a collection.

Collections – What Exactly Are They?

A collection is an unpaid bill that has been sold to a third party that is in the business of recovering money for companies. Not only can this hurt your credit, you can become stressed with collection phone calls that can generally make life miserable.

How long will the collection affect my credit?

Collections may remain on a report for seven years, but they don’t always disappear after this time. Some agencies will update the report on you to keep the account active, extending the time the collection can affect your score.

The statue of limitations does not affect the length of time something can stay on your credit report.

How much does it hurt – really?

The amount that your credit score is hurt depends on the amount that you owed at the time the collection was reported and how recent the collection. Some modules will not take any points off for collections under $100.

Also, remember that the higher your credit score was to begin with, the more the collection will hurt it.

Will Paying Help?

Paying a collection will not remove it from your credit report; however it will be marked as current or paid by the collection agency. This will look a little better on your credit report as it shows you have made the attempt to make things right. You can also ask for removal from your credit report for a payment in full of the account but you should get this agreement in writing.

So, What can you do?

Thankfully there are options for people with collections on their credit report and two of them are very simple and little known.

  • Validate the debt: First of all, make sure that the debt is yours. Even if it is you can ask the company for validation and proof that you owe them money. If the company does not respond or does not provide proof, the collection must be removed from your report.
  • Write a goodwill letter: This little known tip for getting a collection off of your account is simple and leaves everyone feeling better about the whole transaction. Write a letter explaining the issue and ask the company to remove the collection out of goodwill. This works best for small collections that are hurting your credit rating. It helps too if the account has been paid. The key to removing the credit smear through this method is to apologize for the whole misunderstanding and to make the company feel sorry for you.

More methods to remove a collection include:

  • Update: If you have paid an account in full that is not reflected on your credit report, contact the company and get them to change it. This will have a positive affect, although lenders will still be able to see the collection.
  • Settle for less: If you cannot get the collection totally removed from you record, you may be able to settle with the company to pay less than what you owe. This will allow them to recoup a little of their loss. For you it means a mark of ‘settled’ on your credit score. This will not affect your score as positively as a paid in full or a complete removal, but it may be an option if you owe a large amount of money and want to make positive changes in your credit standing, no matter how small that may be.
  • Dispute: You may dispute a collection with both the credit reporting agencies and the original companies. These have 30 days to respond with proof of the collection. Keep detailed records of any correspondence and phone calls to make this method effective.

It is possible to remove collections from your record, just try these little known but effective tips.

This is a guest post.   Chase Sagum is the author of this aritcle. You can see more of his articles at www.lexingtonlaw.com.

Image courtesy of Stuart Miles / FreeDigitalPhotos.net

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