Some people have the unenviable need to remove collections from their credit reports. Do you have a collection entry on your credit report that’s hindering your ability to get credit? Then this is the article for you.
In this article, we’ll look at the steps you can take to remove it. We’ll also look at everything you wanted to know about debt collection, how a collection entry affects your credit score, and the impact of paid versus not paid collections on your credit bureau.
Can You Remove a Collection Entry from Your Report?
If you have a collection entry, the simple answer is yes. It’s possible to remove it in most cases. And that’s something you’ll want to do. A collection entry appearing on your credit bureau can hurt your credit score and, in some cases, stop you from getting car loans and mortgages.
Before we discuss how to remove a collection entry, it helps to talk about what a collection entry actually means, how much it can lower your credit score and how long it can remain on your credit report if you don’t do anything about it.
Everything You Wanted to Know About Debt Collection
There are many forms of debt collection. Examples of collection accounts include unpaid cellphone bills, medical bills, and even that library book you forgot to return in some cases. In all of those examples, the one thing that they share in common is that they can hurt your ability to get credit at decent interest rates unless removed from your credit report.
When it comes to debt collectors, there are two primary ways the creditors attempt to collect the money owing to them. One way is that the original creditor might try to contact you. Another way is that a collection agency may try to contact you.
When a collection agency reaches out to you, it’s for older debt that the original creditor did not collect in most cases.
It can actually be better to deal with the collection agency instead of the original creditor. That’s because when the collection agency is attempting to collect from you, it’s usually for pennies on the dollar. That means it puts you in a better position to negotiate.
How Does a Collection Entry Impact Your Credit Score?
Once one of your credit accounts is sent to collections, a collection entry is logged on your credit report. It’s this negative information that can hurt your credit history. Having a negative entry like this can turn your good credit score into a poor credit score.
It’s hard to say how much of a drop it will lead to in your credit score. Both Equifax and TransUnion have separate credit scores. A collection entry may lead to a bigger credit score drop with one credit reporting agency over the other.
How big of a drop largely depends on how good your credit scores were to start with. If you had an excellent credit score, it could really drag down your credit score. Meanwhile, someone who already had a poor credit score might not seem that much of a drop.
Likewise, the longer the collection entry appears on your credit report, the less it will affect your credit score.
Paid or Not Paid Collections
A common assumption people often make is assuming that paying off a collection will instantly remove collections from your credit bureau.
It’s important to remember that a collection entry won’t disappear from your credit bureau even if you settle it and pay it off.
That means when a lender, whether it’s a credit card company or the bank, sees a collection entry on your credit bureau, it will likely impact their decision of whether to lend to you or not.
Even if your credit account application is approved, your interest rate will likely be higher than someone without a collection entry on their credit report. That being said, it’s certainly worthwhile to take the necessary steps to get rid of a collection entry on your credit report.
When there’s a collection entry on your credit report, chances are pretty good that there are some late payments associated with it. This is likely due to the fact that you were late on your payments.
There is often a separate entry for this debt, apart from the collection entry. There are steps you can take to remove the late payments from your credit report too.
How Long Does a Collection Entry Remain on Your Credit Bureau?
Regardless of whether you paid the collection amount owing or not, the collection entry will stay on your credit report for seven years. As a result of this, for seven years, the collection entry will impact your chances of applying for new credit.
The unfortunate part is that even if they approve your credit, you’re almost always going to pay a higher interest rate. As the collection entry gets older, it will affect your credit score less and less.
How to Remove a Collection Entry from Your Credit Report
If you find an accurate collection entry on your credit report, but you want to remove them, here are the steps you can take to go about doing it.
Have Any Debts Validated
When a debt collector contacts you, send them a letter asking them to validate the debt. Request that they confirm the original creditor’s name, the owing amount, and whether it’s still collectible and falls within the statute of limitations of your province or territory. If a debt is outside the statute of limitations, it can no longer be collected.
Offer Pay for Removal
Pay for removal is when you request that the debt collector removes a collection entry from your credit bureau for payment. There’s nothing that requires the debt collector to agree to this. Whether a debt collector agrees to this usually depends on the debt’s age and the amount, and your previous account history.
Before you request this, make sure you’re aware that by offering pay for removal, you’re agreeing to pay the full amount owing to the debt collector, plus any interest and fees. If you were in the position to do this, you probably wouldn’t have ended up in collections in the first place, so this isn’t always feasible.
Negotiate with Debt Collectors
If a debt collector refuses to remove a collection entry in exchange for payment or you can’t afford to pay off the amount owing in full, you might look into a debt settlement. A debt settlement means that you’re able to settle your debts by paying a lesser amount than is owed. This won’t always get rid of the collection entry from your credit report, but it will show that the debt is paid, improving your credit score.
Remember, if you’re doing a debt settlement, make sure to get everything in writing. You’ll want something in writing to prove the account is current with the debt collector.
Have you tried to remove a collection entry from your credit report, but you aren’t having any luck? We can help. Call us today for assistance in resolving your debt settlement situation on your way to a better credit score.