How to Remove Collections from Your Credit Report

How to Remove Collections from Your Credit Report

Credit history is a crucial indicator of your reliability as a borrower, based on which lenders decide whether to lend you money. In most cases, if they see a credit mark on your report, they won’t want to take the risk and will simply refuse to lend you money. So why does it scare them off so much? 

The whole problem is that the note about debt being taken by collectors appears on your credit report when you haven’t returned the borrowed money on time, and 180 days later, the lender has sold it to a debt collector. This information shows the creditor that you are not a responsible borrower and default on your loan payments.  

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The result is that anyone with a record like that will have to take out a loan with a very high APR or put up their property as collateral and take out secured loans.  

But the good news is that you can remove the negative mark from your report. How? Let’s discuss. 

What are collections on your credit? 

When you take out a loan, you don’t just receive money, you also make a formal commitment to pay it back on time according to the terms specified in the contract. For example, if you miss one payment by a few days, the lender may penalize you. However, if you don’t pay your loan for six months, the lender may sell your debt to collectors to at least partially cover their costs. 

Once this event occurs, a negative mark may appear on your credit report. Its appearance depends on whether or not your lender reports to the credit bureau, so the first thing you should always do is ask Experian, Transunion, or Equifax for your report and check to see if the mark is there. 

When do collections automatically fall off your credit report? 

Usually, most negative marks automatically disappear from your credit report after seven years – the same goes for not paying your debt and selling it to debt collectors. Regardless of whether or not you have paid off the loan after the mark appears, it won’t be removed before seven years unless you address the problem yourself. 

How collections hurt your credit score 

On-time payments of all your loans consist a significant part of your credit scores (35%). If you pay your loan on time every month, your FICO score increases; as soon as you start making late payments, it decreases.

Essentially, selling your debt to debt collectors proves that you are not paying your credit on time, meaning that 35% of your account begins to drop. According to testimonials from people who have found themselves in this situation, their FICO score dropped by 100 points in the first week after this negative mark appeared. 

Besides, if you get more than one mark for referring debts to collectors, your score can drop more than a dozen more points – the most recent marks have the most significance. That’s why it’s essential to know how to get collections off credit reports to improve your credit history and borrow money on acceptable terms. 

Can paid collections be removed from a credit report? 

No marks about transferring your debt to creditors disappear, whether you have paid them or not. They will remain on your report for seven years unless you take care of the problem. You can turn to a credit repair or go all the way on your own, but you will have to take the time to make sure the mark does not negatively impact your credit score for seven years.  

It has to be said that some FICO score and Vantage score models do not count paid collection as a negative mark, but not all lenders use them. So it will be much easier for you to get your next loan if you know how to get collections off your credit report and do so. 

Six ways to remove old debt from your credit report 

It is difficult to remove the mark of the debt transferred to the collectors, but it is possible. You always have two options to solve this problem: the first is to turn to a credit repair company, and the second is to do everything yourself. If you choose the second way, you’d better know precisely how to get collections off the credit report.  

Dispute the inaccuracies

This is the easiest and most effective method if your report has inaccurate information. The first thing you need to do in such a situation is to request the report from the credit bureau and carefully analyze it for the following errors: 

  • The account information is incorrect. 
  • The credit on the report was taken more than seven years ago. 
  • Lender or collector information is incorrectly listed. 
  • The accounts listed are called twice. 
  • The debt that has been sold to collectors is not yours. 

If you find one of these inaccuracies on your report, highlight it and send a letter to all three credit bureaus. In addition, find proof that you are right and list the arguments why you think this mark should be removed. 

If you don’t find any errors, ask the agency to validate the debt

If you find that all the information in your report is correct and the debt is yours, try the following method. It is widespread for creditors to sell a loan to several collection agencies; the chances are high that one of them has made a mistake or simply does not have enough information about your debt. 

If this happens, send a letter to the collection agency you have contacted, asking them to verify that the debt is valid. Note that you must do it within 30 days of the date the collection agency first got you. 

Your debt verification request should include the following questions: 

  • Which lender did the agency’s loan originate with, and in what account? 
  • When was this loan formed, in what amount, and at what APR?
  • What evidence does the agency have that this debt belongs to you?  
  • Is the debt valid, and what evidence is there that it is? 
  • Is the agency licensed to collect debt in the state where you reside? 
  • Is all the information about you on this loan correct (name, address, etc.)? 

The agency must answer these questions in writing within 30 days of receiving your letter. In addition, it is required to stop collecting for that time.

If any information from the previous answers shows that the agency has no right to deal with your debt or that it made a mistake in some data, you can write a dispute letter to the credit bureaus and ask them to remove the negative mark. Also, if the agency cannot provide proof that the debt is valid, you have the right to request that the credit be removed from your report. 

Send a pay-for-delete letter

If the previous two methods didn’t work, you could move on to negotiating with a collection agency and try to arrange to have the mark removed from your report in exchange for payment. 

This is a win-win solution because the agencies don’t need low credit scores; they need the money because they bought your credit just to get you to pay for it. That’s why many debt collectors will agree to remove the mark from your report in exchange for paying off the loan in full. 

However, be careful because this is not a commitment by law on their part, just your agreement. If you negotiate with the collectors that you pay off the loan and they remove the mark, you should keep those arrangements in writing. Never pay off the loan before you have proof of their agreement to remove the negative information. 

To make it official, you must send the agency a pay-for-delete letter. Then, it will respond by formally agreeing to it and providing written confirmation of its decision. That way, even if the debt collector defaults, you will have proof to ask the credit bureaus to remove the mark from your report.

Request a goodwill deletion

If you did not know to negotiate with the collection agency first and agree to remove the mark in exchange for paying off the loan in full, you would have to write a goodwill deletion to them. When you have paid off the debt in full, it is the lender’s or collection agency’s choice whether to remove the debt from your report. To ask them to do this, you will need to write a goodwill deletion letter and explain that you have already paid the debt.  

It is important to note that the lender is not required to remove the mark even after receiving such a letter, so it is best not to pay the loan until you agree in writing with them.

Contact the credit repair companies

Such organizations employ financial experts who know the laws well and how to interpret them in favor of the client. In addition, they are experienced in examining credit reports, so it will be much easier for them to find an error or inaccuracy and negotiate with the debt collectors if all the data is suddenly entered correctly. 

It is essential to say that such companies will do all the same things you can do yourself, so they are more for those who want to save time and effort. But, of course, you can get better results if you take the help of experts because they may know of ways to remove marks that you don’t know about. 

There are only two cons of the decision to turn to such companies: 

  • First, they don’t guarantee results because every case is unique, and they can’t be sure they can help you remove negative information from your credit report. 
  • Their services are expensive, averaging about $90 a month, with the process usually taking at least 2-3 months. 

If the collection hasn’t been removed, continue paying on time

There are times when all of the above methods have not worked, and you have not been able to remove negative information from your report. In this case, you should focus on improving your credit history by any other means available. 

Never despair if the mark has not been removed because it does not define you as a person; moreover, for some creditors, it is not a stopgap. Instead, focus all your energies on learning to manage your finances more wisely and not miss any more loan payments. 

How many points can my credit score increase if a collection is deleted? 

You need to understand that no one can tell you exactly how many points your FICO score will increase because it is calculated based on many criteria. What matters most in this situation is how old the debt is (the more recent it is, the more it matters), what scoring model the lender uses, and what laws apply in your state of residence. 

The average div people talk about after removing the mark is 100 points. However, it is essential to understand that the score can only increase after the negative information has been removed from the report because simply paying off the debt, in this case, will not be enough. 

Start working on removing the mark as early as possible to maximize credit score growth. Also, continue to act as a responsible borrower concerning other loans. 

Does the amount of collections make a difference?

The answer to this question depends on the situation. For example, if you have several collections on your credit report at once, their number will reflect negatively on your FICO account. Besides, if you paid off all the debts, but they remain in your information, many lenders will still provide you with credit.  

There are scoring models for which the number of collections does not matter, and those under $100 do not count towards the credit score. However, remember that if you want to enjoy the best credit terms, you better have the highest FICO score possible, and every debt mark will hinder you. 

How to bounce back after a collection incident 

If you haven’t been able to remove the mark from your credit report, don’t despair – it doesn’t represent 100% of your FICO score, so you can still do many other things to increase it even with bad credit. 

  • Keep making your loan payments on time.  

Get a secured credit card if you’re afraid to take out new loans or can’t because you have a bad credit history. It usually works on a simple principle – you deposit $200, and that deposit becomes your credit limit. 

As a result, you can spend $200 each month and pay it back at a specified time with little interest. Your lender will then report to all three credit bureaus that you are paying your loans on time, and your FICO account will grow.

  • Register a joint account with a family member or close friend with a good credit history. 

This way, your score can grow too, and lenders will be less afraid to lend you money. 

  • Report your rent or bill payments. 

Show the credit bureaus that you are a responsible citizen and meet your obligations on time. 

  • Start learning about financial literacy. 

Usually, people with no plan for their expenses, who don’t understand key financial terms, and who don’t save money have credit problems. There are a lot of free articles and videos online about how to manage your finances better; try a few of the most popular ways and choose the one that works best for you. 

  • Start saving money. 

This essential habit will allow you to never default on a loan again because you will always have money to spare for the monthly payment. 

  • Get help if you feel you need it. 

Many financial institutions have free credit counseling. Take advantage of this service if you realize you’re having a hard time figuring out all of your debts and expenses on your own. Asking for help is a wise and sound financial decision. 

FAQ

Can I get a collection removed without paying?

Yes, but only if it turns out that the debt collector or creditor made a mistake when they put your information on the report. Then, you will have to find any inaccuracies, provide proof of the error, and send letters to all three credit bureaus to ask for the mark to be removed.

Can paying off collections raise my credit score?

Many borrowers think paying off their debt is enough to improve their credit score, but it doesn’t. If you find yourself in a situation where your credit has been turned over to a debt collector, write them a pay-for-delete letter and agree that if you pay off the loan, they will remove the mark from your report. Only then can your credit score go up.

Can I have a 700 credit score with collections?

In general, it is possible but doubtful – it depends on the scoring model used and your credit history over the past few years. However, remember that having such a mark on your report usually results in a score drop of 100 points.

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