How to Remove a Collection from Your Credit Report
How does a collection account affect my credit report?
If you have outstanding account balances and you're not paying them, most creditors turn the account over to a collections agency. Some creditors have in-house collection departments, but many creditors use third-party collection agencies to attempt to collect delinquent debts. When a creditor turns an account over to a collection agency, they typically report a negative notation to the three major credit bureaus. This may be a 'charge off' - which is really just an accounting term, and does not indicate that your legal obligation to pay a debt is discharged - or simply "seriously delinquent" or "collections." This initial negative entry drops your score significantly, depending on other items on your credit report. You could see anywhere from a 30 point drop to something even more significant, if the collection account changes the scale on which FICO rates your score.
After your creditor sends your account off to a collection agency, the collection agency may then make a duplicate entry on your credit report because your account is now in collections with them. This can further affect your credit score, and may give lenders the mistaken impression that you have multiple accounts in collections. No matter how you look at it, a collection account on your credit report is a bad thing, and you should take steps to remove a collection from your credit report.
Credit collection dispute.
One way that you can attempt to delete a collection account from your credit report is to dispute the collection item with the credit bureau. If the collection account reflects an inaccurate date of last activity, or DOLA, you can legitimately dispute the item. Some collection agencies change the DOLA to reflect the date that they acquired the account, which can be significantly more recent than the date of the actual bad debt. Look out for this practice. If you find a collection account with an incorrect DOLA, dispute it. Make sure you dispute the credit collection account in a productive way. The burden of verification is on the credit bureau, so let them do their job in an investigation. Don't provide too many details that may complicate a dispute investigation. If your dispute is successful, you may be able to delete the collection account from your credit report. At the very least, you can force the credit bureau to remove the duplicate entry through the collection agency for a specific account, as duplicate entries are not permitted on your credit report.
Negotiate to remove collection accounts from your credit report.
If your dispute is unsuccessful or if the collection account on your credit report is valid and accurate, you may want to negotiate directly with the collections agency to remove the account from your credit report. If you have the money to repay your collection account, contact the collection agency by mail to negotiate the removal of collection accounts in return for payment. Collection agencies can be extremely high-pressure over the phone, and verbal agreements are much more difficult to enforce than written agreements, so it's important to get the terms of your agreement in writing. Make sure the collection company gets the original credit involved. The only item that a collection agency can remove from your credit report is their entry - the original creditor's entry indicating that the account was sent to collections can only be modified by the original creditor. Make the collection agency provide written documentation from the original creditor agreeing to remove the 'collection' status from your account. If possible, get the original creditor to mark your account "paid as agreed" - the best case scenario that can drastically improve your credit.
Beware the updated DOLA and statute of limitations.
The statute of limitations under which creditors can sue you to obtain their money varies from state to state, typically ranging from three up to 15 years. In some states, the statute of limitations on a debt restarts when you contact a creditor or collection agency to remove the collection from your credit report. Before you contact a creditor, find out your state's policy on statute of limitations for debt collection. Beyond the statute, though - contacting a collection agency may cause them to update the collection account DOLA on your credit report. This can actually hurt your credit report, as an updated DOLA may cause the debt to appear to be much more recent than the original date of collections. An updated DOLA reflecting a recent account activity can cause your credit score to drop. If this happens, dispute the collection account on your credit report.
If you'd like to learn how to effectively dispute items on your credit report, check out the Credit Secrets Bible. For more information on repairing your credit, subscribe to our free credit tips newsletter.
