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How to Remove Collections From Credit Report

Debt can be a tricky thing. One day, you don’t have any debt and the next, you’ve missed one payment and owe that plus interest. While some creditors can be forgiving, others are not, inflicting penalties and higher interest rates. While repaying debt can be hard, you should do your best to avoid debt collections. For one, being hounded by debt collection agencies won’t be fun. Plus, debt collections on your credit report can damage your credit score. 

Check out our the best credit cards of 2017.

What Is Debt Collection?

Debt collection is when a creditor gives up a delinquent account to a debt collector. For example, if you continue to ignore your credit card bills, you credit card issuer can send your account to a debt collector. The account will show up in your credit report as a “charge off,” essentially saying that the issuer has given up trying to elicit payments from you. The debt collection agency will take over the account responsibility, including pursuing you for your payments.

Many different kinds of accounts can be sent to collections. Credit cards, auto loans, mortgages, even utilities and medical bills can be sent. Unpaid medical bills can sometimes get you some slack, though.

While debt collections may seem ruthless, the Fair Debt Collection Practices Act put consumer protections in place when it comes to debt collections. This law prohibits debt collectors from actions like threatening you, calling you at unreasonable hours or disturbing you at your place of work.

If you start to hear from a debt collection agency, your first step should be to check your credit report. Make sure there are no inconsistencies or mistakes there. You can also contact the debt collection agency directly to have them validate the debt. You have to do this within 30 days of receiving word of your debt being sent to collections. Validating the debt ensures that you’re actually responsible for the account at hand. If they can’t validate the debt, then it must be removed from your credit report.

How Do Debt Collections Affect My Credit Score?

Once an overdue account lands with a debt collection agency, the account will show up in your credit report as an “unpaid account.” The original account, labeled as “charge off,” will remain in your report.

Once in your credit report, debt collections drop your credit score anywhere from 50 to 100 points. The exact amount depends on your score, but generally the higher your score, the bigger the dip. Debt collections will also remain on your credit report for up to seven years. However, the bite it takes on your score lessens with time.

Unfortunately, the collection still stays in your report even if you repay it in full. As long as it remains in your report, potential lenders and creditors can see it. This could easily dissuade them from lending to you. This is why it’s important to quickly validate the debt. That way your credit score isn’t unnecessarily harmed. If it’s too late for that, you can look into removing collections from your credit report.

How to Remove Collections From Credit Report: Dispute It

How to Remove Collections from Credit Report

Your first shot at removing debt collections accounts from your credit report is to dispute the debt. One scenario happens when the account is not your debt at all. Again, you should catch and dispute this within 30 days. Doing so will make your life easier, but if you miss the deadline, you have other options.

Simply put, you can’t be held responsible for a debt that isn’t yours. You will have to submit a credit report dispute. This dispute goes to the three credit bureaus, Experian, Equifax and TransUnion, who can then remove the debt from your report.

You can also submit a dispute when your debt collection has been sold from one collector to another. When this happens, the account information on your report often ends up outdated. Then you can send in a dispute to have the older account removed.

Lastly, you may dispute the debt collection account after seven years. But isn’t the account automatically removed from the report after seven years? Typically, yes. However, some collectors may try to “re-age” a debt to keep it on your report even longer. So if you notice that a debt collection account remains on your report after seven years, be sure to dispute it immediately. Providing the bureaus with proof of your original overdue account dates will help.

How to Remove Collections From Credit Report: Pay It

Unfortunately, sometimes disputes don’t work out. In that event, you might have to pay up. This doesn’t necessarily mean paying the debt back in full, though. Since paying the whole amount will probably prove difficult at this point, you can work with the collector to make a smaller payment.

Send them a letter requesting that they remove the debt collection from your credit report. In exchange, you will make a payment to them. Sometimes collectors will flat out deny this request. Other times, collectors will defer you to the original creditor who has more legal power to remove the debt collection.

If you successfully get your request approved, be sure to receive the agreement in writing. Ask the collectors and creditors for the written confirmation. That way, you will have proof to show in case the debt isn’t actually removed. You may also want to be sure that the collector and creditor mark the debt collection as “satisfied in full.”

On the other hand, if you’re able to pay the debt in full, you should do that. The debt collection will still remain on your credit report, unless you later dispute it. However, your credit score will see an improvement. A “paid” debt will look much better on your report than an “unpaid” debt. Plus, potential lenders and creditors will see that you took some charge of your finances and repaid that debt. 

Goodwill Deletion

If all else has failed, you can try shooting for a goodwill deletion. This involves sending a goodwill letter to the credit bureaus to remove debt from your credit report. Often goodwill letters detail why you have failed to repay those debts. This usually includes situations like emergencies, job loss and illnesses, that hit your finances hard.

Generally, a goodwill letter will be explanatory, honest and polite. It helps to be appreciative, to the point and responsible for your actions and situation. It could also help to have proof of the financial hardships you discuss in your letter.

Final Word

How to Remove Collections from Credit Report

Owing money is never fun. Hopefully, you never end up having to deal with debt collectors. But if you do, know that it’s not the end of the world when debt collections are added to your credit report. Just remember that you have options whether you want to dispute it, pay it or simply ask for it to be removed. If handling this situation overwhelms you, you can also find a financial advisor to help you out.

Tips for Getting Out of Credit Card Debt

  • Sometimes we bite off more than we can chew – especially with credit cards. You’re chugging along and then suddenly, you’ve got credit card debt! It’s important to take care of it sooner rather than later. Leaving it to accumulate even more interest only means you’ll owe more and more. Once you see that you owe money, make a plan to repay that credit card debt as soon as possible.
  • One solution you have available to you is to transfer one card’s balance to another card. Ideally, you should be transferring that balance to a 0% APR credit card. This 0% APR usually only lasts for a few months, though, so be sure to pay off your debts before it ends. You may also want to consider switching to a low interest credit card. That way you won’t get caught up in a quickly growing balance.

Photo credit: ©iStock.com/tommaso79, ©iStock.com/SebastianGauert, ©iStock.com/XstockImages

Lauren Perez, CEPF® Lauren Perez writes on a variety of personal finance topics for SmartAsset, with a special expertise in savings, banking and credit cards. She is a Certified Educator in Personal Finance® (CEPF®) and a member of the Society for Advancing Business Editing and Writing. Lauren has a degree in English from the University of Rochester where she focused on Language, Media and Communications. She is originally from Los Angeles. While prone to the occasional shopping spree, Lauren has been aware of the importance of money management and savings since she was young. Lauren loves being able to make credit card and retirement account recommendations to friends and family based on the hours of research she completes at SmartAsset.
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