Here are 5 simple steps that will help you remove collection accounts from 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. A great place to start to learn more about your consumer rights as it pertains to your credit report is through the US Government Federal Trade Commission website.
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 the 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. You can learn more about how to request your free annual credit reports through the only government-mandated website. 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 to remove the collection account
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 recorded 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 so make sure you get this in writing. Remember, once you’ve agreed to terms, comply with the agreement.
4. Review the same credit report to ensure the collection account was removed
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 the 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.
Want to stay on top of your credit report? Use a free tool such as Credit Karma or many other credit report monitoring services that alert you of report changes. The sooner you know the quicker you can dispute mistakes.