How to get collections removed from your credit report

Maybe you’re in the process of getting your debt under control and you’re wondering how to remove paid collections from credit report. A paid collections account can look like a major red flag to future lenders. Overall, they can make your finances suffer all while you’re trying to recover from crippling debt. No need to fear, there is hope in potentially removing paid collection accounts. There’s also hope in boosting your credit score even with a collection account on your credit report. The legal team at Eric Wilson Law LLC explains all this and more below.

For more information on how we can help you achieve financial freedom, call 205-349-1280 today.

What is a Collection Account on a Credit Report?

A collection account is basically an account that someone has continuously failed to pay, therefore racking up loads of debt. When this happens, a debt collector may sell the account to a collection agency in order to take care of the debt. Once collection agencies buy accounts, it will show up on credit reports as a completely separate account. The Fair Credit Reporting Act mandates that collection accounts must stay on a debtor’s credit report for at least seven years. With multiple collection accounts on your credit history, you could struggle to increase your credit score or obtain future loans.

If I Pay a Collection, Will it Be Removed From My Credit Report?

In short, no. Just because you’ve paid a collection account does not mean it will automatically be removed from your credit report. Similar to a Chapter 7 or Chapter 13 bankruptcy filing, a paid collection account will stay on your credit history for up to seven years, even if you ask major credit bureaus to remove it. After seven years, a credit bureau is required to remove paid collections from your credit report. This timeline may sound hopeless, especially if you’re desperately trying to boost your credit score after years of drowning in debt. But there are ways to negotiate with creditors about this very issue.

How Do Collection Accounts Affect Your Credit Score?

Collection accounts can be good indicators of financial responsibility, which is why creditors and credit bureaus often view them as red flags. The good news is that a paid collection account looks way better on your credit report than an unpaid one. So most of the time, an unpaid collection account will have a huge negative impact on credit scores, while a paid account will just sit there for the sake of evidence of your past financial behavior. This is especially true for the newest credit scoring models: VantageScore 3.0 and 4.0 models and the Fico score 9.0.

This means that you don’t really need to remove collection accounts from your credit report, especially if they’re paid, and especially if current and future lenders are using the newest credit scoring model. Still, it’s understandable that some people want to completely erase their financial struggles from their credit reports.

What if Your Credit Report Has Inaccurate Information About Your Collection Accounts?

Maybe you pulled a free credit report from one of three credit bureaus and saw that the information about your collection account is completely wrong. Maybe it says that you still have unpaid collections accounts even if that’s untrue. Or maybe it lists the wrong amount of debt.

You can dispute any inaccurate information on your credit report by writing a letter to all credit reporting agencies (Equifax, Experian, and Transunion) and asking them to fix it. These companies are required by the Federal Credit Reporting Act to remove all inaccurate information from your credit report until it has been fixed. It’s important to note that writing a dispute letter is only effective for inaccurate information. If you write a letter saying that you want a collection account removed just because you don’t like it, you’ll be wasting your own time.

How to Remove a Paid Collection Account From Your Credit Report

Even though a collection account is supposed to stay on your credit report for a while, there is still hope. You may be able to ask the debt collection agency that bought your debt from your original creditor to remove collections from your credit. Collection agencies may very well agree to remove it if you ask. If they disagree, then the account will just stay there for seven years.

Goodwill Deletion

A collection agency that agrees to remove an account is basically engaging in what’s called a goodwill deletion. In other words, the collection agency agrees to delete it out of pure goodwill. The best way to make this happen is to write the agency a goodwill letter, which may or may not work in your favor.

Pay For Delete

Another potential option for getting a collection account removed from your credit report is what’s called a “pay for delete” negotiation with your collection agency. Basically, you could offer to fully pay off your debt in exchange for getting the paid collection removed from your credit history.

This will only work if the collection agency doesn’t have a specific contract with a credit bureau that instructs them to keep all delinquent accounts on your report for at least seven years. This detailed credit history, delinquent account and all, allows credit bureaus the informed decision about whether they should loan money to the person in question. So collection agencies in strict contracts like this may not go for the “pay for delete” negotiation because they would be at risk of cutting ties with the credit bureau and going out of business.

Some collection agencies don’t have strict contracts like this, so it never hurts to do your research and give it a shot. If this negotiation does work out for you, make sure the debt collection agency states in writing that they will follow through. If not, they may not honor your “pay for delete” request.

How to Increase Your Credit Score When You Have a Collection Account on Your Credit Report

Even if you attempt the strategies above, you still may not be able to remove an account from your credit history. At that point, your focus should be on a credit score increase. Follow the steps below to boost your credit score even if you have a collection account stuck on your report.

• Pay Your Collection Accounts: if you haven’t done this already, this should be your top priority. As stated previously, unpaid collection accounts are much worse for credit scores than paid ones.
• Make On-Time Payments: One of the best ways to boost credit scores is to simply pay your bills on time. This is way easier said than done, especially if you’re crippled by debt, but it’s a great goal to work towards. Many lenders, debt collectors, and credit bureaus are very hyper-focused on payment history. If your history is full of missed payments or late payments, your score is certainly going to suffer. As a result, you will struggle to get a loan down the line when you really need it.
• Remember Your Credit Utilization Ratio: This ratio is basically your total credit limit compared to your current credit card debt. In other words, it’s important to keep your credit card balances as low as possible. Before giving you a loan, lenders will likely check to see if your credit utilization ratio is under 30%. Generally, the lower your ratio percentage is, the better your credit score will be.
• Keep Unused Credit Cards Open: As long as credit cards aren’t charging you, why close them? Keeping your unused cards open could decrease your credit utilization ratio, which is a good thing for your credit score.
• Get Credit for Phone and Utility Payments: If you’re consistently making timely cell phone and utility payments, you could use this to your advantage. Experian, for example, has a free program that can boost your credit score if you give them access to your phone and utility payment history.
• Make Sure Credit Reports Have Accurate Information: Maybe your credit score is actively suffering because it’s incorrectly showing that you have one or more unpaid collection accounts. That’s why it’s important to check your credit reports frequently. As previously explained, if your report contains inaccurate information, you can dispute it in order to resolve it

Not only is Eric Wilson Law LLC a bankruptcy law firm, we’re also a credit repair firm. Our legal team is passionate about helping our clients take care of unpaid debt and fix their credit reports. We have extensive knowledge of fair debt collection practices, so we know when creditors are crossing into harassment territory and when you’re being taken advantage of by the system. For more personal finance support, call 205-349-1280 today.