In many cases, the difference between an individual’s ability to obtain new credit and their inability is the magic number on the credit report – the credit score.
A low credit score is the result of inefficient finance management or failure to pay the debt on time on the borrower’s part.
If you have been receiving invoices for the unpaid balances from your creditors while your credit score has been taking a nosedive, it means your financial health is about to take a toll and create a hindrance to your future plans.
Not paying the debt will lead to the collection agency pounding on your door, calling you day in and day out at your workplace and residence.
Debt collection will be noted on your credit report, and the information passed on to creditors and lenders when you seek out loans.
Now the bigger questions that need to be asked are: Can credit repair remove collections from your credit report? If the bills are unpaid, what can you do about it? One option is to get help from professionals.
Is there a way to straighten out your credit report? The answer is yes, and you are about to embark on a couple of solutions that will help you make informed decisions about accumulated debt.
How to Remove Collection From Your Credit Report?
In order to remove the collection information from your credit report, you will have to first file a dispute. You can only do this if you think and believe that you have been treated unfairly or the information on the report is inaccurate.
Another reason you may want to take this route is because of the lowering credit score. Remember that any information added to your report by your collection agency is not permanent and can be altered accordingly, preferably in your favor, if it can’t be verified.
On the flip side, if the information is correct and there is little or no chance of success with filing a dispute, you can try negotiating with the collection agency or creditor and get it removed from the report.
Either way, you will have to formally request the removal, with everything done in writing. There are plenty of tools to do this and a number of finance professionals to help with the process. They have experience removing difficult Items.
By the way, when I say finance professionals, I mean well-established credit repair companies.
How to File a Dispute with the Credit Bureau?
Filing a dispute with a credit bureau that generated your credit report is a straightforward process. Through this, you will be able to successfully remove the collection information from the report if it’s believed and found to be inaccurate or false.
The Fair Credit Reporting Act (FCRA) lets every consumer have fair and accurate reporting by the credit bureaus. This provision can be used to address collections and have your credit repaired within a reasonable time.
Steps to file a dispute:
The steps involved in filing a dispute for inaccuracies and false information are given below.
- First, review your report and note down the inaccuracies, if any. Examples of inaccuracies include, but are not limited to, the same debt reported more than once, someone else’s debt added to your report, a listing of the wrong collection agency on your report, and the debt that is paid off and cleared still appearing on the report.
- Collect all evidence that proves the inaccuracy. This may include your bank statement, court order, job history, income report, and expense report. These documents are required by the credit bureau to investigate the inaccuracies.
- Formally report the errors to the bureau. Include your identity information, details of errors as well as supporting documentation when you are sending the request letter.
- The credit bureaus are obligated to investigate the dispute and respond within 30 days of receiving the letter. They will report back with their findings and also get in contact with the collection agency to verify the report.
If the debt collection agency fails to respond to the bureau’s request or cannot substantiate the requested information, your collection information will be taken off the report.
However, if the agency verifies it with evidence, the collection will remain on your report for up to seven years. Again, this is why doing this on your own may not make sense. If you want your best shot out of the gate, use professionals.
How to Write a Pay for Delete Letter?
There are other ways to remove your collection info from the credit report. One such way is by writing a pay-for-delete letter.
This letter is a negotiating tool for removing negative information in exchange for payment. Note that neither the collection agency nor the credit bureau is obligated to agree to this request.
If they do agree, however, make sure that every term and condition of the negotiation is in writing. Do not just willy-nilly send a payment over.
Requesting a Goodwill Deletion
A goodwill deletion is a formal request sent to your creditor. It is a request to remove any negative item from the report out of goodwill.
So, if you have had a positive working relationship with your creditor/lender in the past, this move could work.
What to do When Your Debt is Sent For Collection?
Sending the debt to a collection agency is the last move a creditor will want to take when every other attempt to collect the debt has failed. Your debt is typically sent for collection after 180 days of non-payment.
The creditor sends it to the agency with the intention of recouping some of the loss. Once the agency receives the debt information, they will begin to contact you for payment.
Sometimes, your debt is not reported to the bureau if the debt is paid in full after the contact is made. Regardless of the situation, the agency has to abide by all the rules noted in the Fair Debt Collection Practices Act.
Common Credit Repair Questions
Q: How does a collection of my debt affect my credit score?
A: Your debt going to a collection agency is an indication that you have failed to pay off the debt for so long that the creditors had no choice but to send it for collection. This is a huge red flag as your future creditors will consider you to be a credit risk.
Q: Does paying off my collection account raise my credit score?
A: An undisputed collection item will remain on your report for up to seven years from the date it was first reported as past due. So, paying off your collection account will not raise your credit score immediately or automatically remove the record from the credit report.
Without further action, it can remain on the report and continue to negatively impact your credit score. This is why it is highly recommended to work with a company that can analyze what is going on with your report BEFORE you make any moves.
Q: How to avoid getting your debt reported to the collection agency?
A: There are many ways to avoid being reported to a collection agency by the creditor. But first, you need to take control of your own finance. For this, you need to track spending on a monthly basis, cut down on wasteful expenses and make informed investments.
Many budget tracking and finance tools can help you keep an eye on your budget, and most of them are free as well.
Debt consolidation is another way of keeping yourself out of trouble and safe from collection agencies. You can also try negotiating with your lender to lower the interest rate or devise a flexible payment plan.
You will never know what works unless you have tried any or all of the above methods. Or you have hired professionals to help.
Can Credit Repair Companies Remove Collections?
Paul Martinez is the founder of BendingDestiny.com. He is an expert in the areas of finance, real estate, and eCommerce.
Join him on BendingDestiny.com to learn how to improve your financial life and excel in these areas. Before starting this blog, Paul built from scratch and managed two multi-million dollar companies. One in the real estate sector and one in the eCommerce sector.