A past-due debt going to collections is one of the most detrimental things to hit your credit report. But then again you’ve witnessed this first hand. You’ve watched your credit report crash and burn, from delinquent payments, to charge-offs, to collections, and possibly even bankruptcy. Now you’re seeking to recover after having fallen so deep down the rabbit hole.
There are certain items that you have to let time handle. For example, a bankruptcy will stay on your credit report for up to 10 years, while paid collection accounts can remain for up to seven years. Both reflecting poorly on your current good credit behavior and being a hindrance to you accessing new credit.
The bankruptcy being on your report is often seen as a fresh start to many lenders however those collection accounts can give pause. Can those collection accounts be removed? Here we take a look at your options to clear the scourge from your credit report and get you back on a path to attaining a good credit score.
To Settle or Not to Settle, That is the Question?
Once you have an account sent to collections, you’ll receive numerous notifications from the collection agency stating this is an attempt to collect a debt… and so on. But how to tackle those seemingly insurmountable balances?
In most situations the collection agencies will offer flexible payment options, a cancellation of the debt by full payment of a reduced settlement amount, or a combo option of installment payments on a reduced amount. These are great options to get the process started, especially if you cannot pay the full balance owed.
Look at the debt collector’s offer as the first in a series of negotiations. You can counter offer. Or if the collector does not offer a settlement, you can offer an amount you’d like to pay. There’s no law against lowballing. And once the offer amount is accepted, clearly state your terms. One would think that by paying off the balance owed the collection would immediately be erased from your report, but in many instances that may not be the case. State that you would like the collection record removed from your report once paid. Place all stated terms in writing and mail in letter with check.
Collection Account Errors
There are some cases where the balance was paid off in the past and somehow still ended up on your credit report. Back in college I remembered closing a credit card account and working with the creditor to pay of the remaining balance through monthly installments. A few months later I found a new collection listed on my report and after investigating determined it was from the credit card I’d paid off.
All I could think was that these creditors are out to get me. And I’m sure a few of you may have had the same sentiment. It took some back and forth between me, the collections, and the creditor before the issue was rectified, but it was removed within the month.
You may have collections accounts that are erroneous, being that they were reported after having been paid. Or some that are more than a decade old and are far beyond the statute of limitations for your particular state of residence. In these instances a simple written request for a validation of the claimed debt could serve to have it removed from your credit report as being unfound.
This method can be done directly with each credit bureau by using a 609 Credit Dispute letter. According to the Fair Credit Reporting Act (FCRA) section 609 requires credit reporting agencies to remove outdated or unverified negative items from an individual’s credit report. Otherwise the credit reporting agency is required to provide documented proof of the debt. If there is no documentation the debt info must be removed from the credit report. This is often the method many credit repair agencies use when you employ their services.
Pay or Dispute, Rinse, Repeat.
It starts with staying on top of monitoring your credit report. The best case scenario would be to keep paying your outstanding debts so that they do not get charged-off and end up in collections. But if you end up with accounts in collections, reach out to the debt collector and begin the process.
1. Ask for validation of the debt and once that is received proceed to negotiate a settlement amount and terms.
2. Establish terms that would delete the collection from your credit report. Most creditors are willing to agree with this provided you pay as agreed.
3. Put all terms in writing with the amount, due date, noting the collection agency will notify the credit bureaus of your paid in full status and removal from credit report (if applicable).
4. Follow-up by checking your credit report each month to verify that the debt was removed, and if not reach out to the debt collector or the original creditor.
If you’re initial request for validation of debts could not be validated, then follow-up in writing with the debt collector to request that these accounts be removed from your credit report. Keep checking your report each month to ensure these issues are taken care of. In situations where the collection agency is unable or unwilling to agree to your terms or help you remove the negative information from your credit report, you will need to dispute it with the credit bureaus. Thankfully, now the disputing process can be done easily on the credit bureaus websites.
Follow-up is the key! Remember at the end of the day it is your credit history and score that suffers, so it is imperative to stay on top of the debt-collectors and credit reporting agencies to ensure the issues get rectified. Give the debt collector a taste of their own medicine for once, and reap the benefit of watching your credit score climb in the process.