Money Smarts

5 Steps to Remove Collection Accounts from Your Credit Report

Thousands of people pull their credit reports daily and may find a collection account. Federal laws give you the rights to dispute and correct information found in your credit report.

Did you get a copy of your credit report and found a collection item? Are you questioning the validity of these collection items? If so, you’re not alone. Many people who review their credit reports find inaccurate information. Federal law requires credit bureaus to report only accurate information but it is up to you to verify and dispute the information you find.

Removing collection accounts is very common. It might seem confusing and time-consuming but the positive impact of removing an erroneous collection item can mean a big jump in your credit score. That can mean better interest rates saving you hundreds if not thousands of dollars in financing.

In order to remove collection items, you must know your rights.

For starters, collection accounts appear on your credit report when a lender has unsuccessfully collected a debt. The original lender sold the bad debt to an agency who then places a collection item on your report. Collection agencies are not affiliated with the original lender. Their purpose is to earn money by collecting the full amount of the debt that they bought for pennies on the dollar.

The process is best explained like this:

After months of nonpayments on a debt, the delinquent account becomes uncollectible. After multiple attempts to collect payments, the lender will sell the debt to a collection agency. At this point, the lender will report your debt as “Charged Off” on your credit report. This means the lender has taken your debt off their accounting books.

What appears on your credit report

The collection agency who purchased the debt will then report it to the credit bureau as a collection account. This collection account is what appears on your credit report.

You may need to do some digging to determine if the collection accounts indeed are not yours or related to any old “Charged Off” accounts.

In your credit report, you will find the Charged Off account in your credit history section and a collection account. These two items will impact your credit score. That’s a double whammy.

So what happens when a debt was sold to a collection agency but you paid it in full with the lender? You’ll need all your proof to get this resolved. What happens if you want to pay off or settle the collection amount? You’ll need to spend some time and do some work.

With all that said, there are no assurances that a collection account will be removed from your credit report. Even after you’ve paid the collection debt the item may still appear in your report.

Here are 5 ways to remove collection accounts from your report:

1. Get your credit reports

Go to AnnualCreditReport.com  to get your free credit report from all three credit bureaus.  Print your credit reports and with a highlighter and pen review the sections for accuracy. This step helps you determine what information needs correction. If you find a collection account, highlight the information and circle the agency name and contact number. The collection agency’s contact information will be found alongside the reported collection account.

2. Call the collection agency

Before you call the agency, have a piece of paper and pen handy. Write down the date, time, person you’ve spoken with, and any other pertinent information discussed for your records. Request verification of the debt to determine who the original lender was and the original debt amount. You want to determine if this debt was paid but reported inaccurately or a debt that is reporting on your report but belongs to someone else.

The collection item is inaccurate: Dispute the information and back up your claim with supporting documents.

The collection item is accurate: Request a settlement amount with a “pay for delete” clause. The clause stipulates the removal of the collection item upon payment.

Creditors and collection agencies are not required by law to report information to credit bureaus. However, if they do report information, Federal law requires that information to be accurate.

3. Get the agreement in writing

If you’ve determined this collection item does belong to you, make sure you get the agreement in writing. An email can suffice but usually, a mailed letter is best too. You’re most likely going to come to a verbal agreement with the agent to make sure you this in writing. Remember, once you’ve agreed to terms, comply with the agreement.

4. Review the same credit report

If you find the collection account balance is now $0, call the collection agency and dispute again with the credit bureau. Again, write down the dates, times, and people you’ve spoken to and any information discussed.  Dispute the information on your credit report directly with the credit bureau. You can do this online.

5. Dispute the information with the credit bureau, again

Once you’ve satisfied the agreement terms or discovered the collection is not yours, you want to dispute the information directly with the credit bureau. By law, credit bureaus have 30 days to respond to disputes from date of the request. The bureaus will remove any inaccurate information or if they do not receive any feedback from the agency. Or if the bureau does not respond to you in time, they must by law remove the item from your credit report.

If necessary, submit your dispute and additional information to the credit bureaus via courier mail with a USPS return receipt.

Don’t get frustrated. Persistence can pay off. The credit bureaus are not your enemy. They follow federal consumer laws that govern how they operate. The more you know the better control you have over your credit report.

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Jason Vitug

Jason Vitug is founder at phroogal, creator of the award-winning project the Road to Financial Wellness, and author of the bestseller and NY Times reviewed book, You Only Live Once: The Roadmap to Financial Wellness and a Purposeful Life.

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6 thoughts on “5 Steps to Remove Collection Accounts from Your Credit Report”

  1. Remember credit Bureaus are not your enemy!….with that being said,I start to explain my situation…after I contacted creditors of 2 of my credit cards accounts,they toll me that they stop reporting to CB once the accounts are closed and with zero balance..thats my case.After that,in my opinion Credit Bureaus report false data as I can prove with credit reports for last 3 years..I see data changed,I mean basicly delinquencies changed from 30 days to ND and some cases from 30 days to OK,coincidense or not all changed when they’re about to expire(7 years).in my case carryng first delinquency date to second one….Amazing..Any help how to dispute this with them?…thank you

    1. Credit bureaus are not your enemy but they report what is provided to them. It’s up to the owner of the report to make sure it is accurate. The data you see will change as information shared with them by the reporting institutions can change. Dispute the information directly with the credit bureau, provide a letter explaining exactly what you’ve discovered which may be a discrepancy on dates of delinquencies. Keep notes on who you speak with over the phone, date and time. Take all that information and mail it to the credit bureaus with USPS tracking to confirm it was received. They’ll respond within 30 days. If unresolved get on the phone again.

  2. If you’ve missed any payments on your power bills or phone bills or credit card or loan repayments or gone over the credit limit on your credit card once too often, then you may find your creditors have listed it as an ‘unpaid default’. Your creditors will try to contact you several times to get a payment made to put your account back in order, but if this doesn’t happen, you could find the debt goes to a collection agency. You could also end up with a judgment listed on your credit rating if your creditor takes you to court to recoup the amount of money you owe.
    Get More Here : http://www.youtube.com/watch?v=2CAFsOE6_oU

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