How to Remove Collections from Credit Report

Living with collection accounts is hard. In addition to the hounding calls from debt collectors, collection accounts can make it difficult to qualify for affordable financing, lease an apartment, or even to land a job.

If you’re struggling with collection accounts, you would probably love to turn back time and erase these problems. Although that’s not possible, there is some good news. You might be able to remove collections from your credit report in other ways.

What Are Collections? (Original Creditor vs. Collection Agency)

When you can’t pay a bill as promised, the creditor may start searching for other means to collect the debt. Once your account becomes 90 or more days past due (180 days for medical debt), your creditor might take one of the following steps.

  1. Your original creditor may move your account to an internal collection department.
  2. The creditor could hire a collection agency to try to collect your past-due bill.
  3. A collection agency may buy your unpaid debt at a discount from the original creditor.

If option two or three occurs, a new “collection account” may show up on your credit report soon.

What Are the Typical Types of Collection Accounts?

Many unpaid debts and bills have the potential to turn into collection accounts. A few common types of collection accounts on credit reports include:

  • Medical Bills
  • Credit Card Debt
  • Loans (Auto, Student, Personal, etc.)
  • Apartment Leases
  • Mobile Phone Agreements
  • Utility Bills

What Does Going into Collections Mean?

Once a collection agency buys your account (or is hired by the original creditor to collect it), you might experience any of the following.

  • A third-party debt collector may contact you. You may receive letters, phone calls, or both asking you to pay your debt. The debt collector may continue contacting you unless you ask it to stop, in writing.
  • A new collection account may show up on your credit reports. First, you’ll have 30 days to dispute the validity of the debt if you disagree with it. Your original debt may also be updated on your credit report to a status of “charged-off.”
  • The collection agency might sue you. This is the worst case scenario and, thankfully, it doesn’t always happen. But when you ignore a debt collector or refuse to pay, there’s a chance the debt collector might file a lawsuit against you. If you lose, the court could allow the collector to garnish your wages or levy your bank account.

If you can’t pay a secured debt, like an auto loan, you risk losing the asset that’s tied to your loan. For example, your auto lender might repossess your vehicle and sell it at auction. Any remaining balance could be sold to a collection agency after the fact.

Still, debt collectors have rules to follow. The Fair Debt Collection Practices Act (FDCPA) sets limits on what debt collectors are allowed to do. A debt collector can’t, for example, harass you or threaten to sue you unless it actually plans to follow through with legal proceedings.

How Collections Affect Credit Scores

Once you fall 90 days or more behind on a payment obligation, it’s a major derogatory event. Collection accounts fit into this category. Where your credit scores are concerned, collections can cause a lot of damage.

How much a collection account damages your credit score depends on several factors. Most importantly, the rest of your credit report comes into play. If a collection account is the first negative entry on an otherwise clean credit report, the score damage may be severe. But if a new collection appears on a credit report that’s already full of other negative information, your credit score might not be impacted much.

Paid vs. Unpaid Collections

Many believe paying a collection will remove it from their credit report. Unfortunately, that’s not the case. (See below for details about how long collections can stay on your credit report.)

Not only will a paid collection stay on your report, it may have roughly the same impact on your credit score as it did when the account had an outstanding balance. Whether or not paying a collection helps your credit score largely depends on the credit scoring model a lender uses when you apply for financing.

Newer credit scoring models, like FICO 9 and VantageScore 3.0 and 4.0, ignore $0 balance collections. Under these models, paying a collection might improve your credit score. FICO 8 disregards all collections if the original balance was under $100. But, if your original collection was over $100, it could still potentially damage your score after you pay it off.

Not all lenders use the four credit scoring models mentioned above. When you apply for a mortgage, for example, lenders still use much older FICO Score versions. These older FICO Scores consider not so much the balance of a collection account, but rather its existence. So, paying a collection is unlikely to improve your score if you apply for a mortgage or any other type of financing where the lender uses an older scoring model.

How Long Do Collections Stay on Your Credit Report?

Like most other negative items, collection accounts have a time limit. The Fair Credit Reporting Act (FCRA) restricts how long the credit bureaus can keep collection accounts on your credit reports.

Collection accounts can stay on your credit report for around seven years. But the seven-year clock doesn’t start the day a collection agency buys your debt. Rather, the FCRA states a collection can stay on your report for up to seven years from the date the original account became 180 days past due.

There’s nothing you or a collection agency can do to legally reset this credit reporting clock. Whether you pay the account, settle it, or leave the debt unpaid, seven years is the credit reporting limit.

3 Ways to Remove Collections from Credit Report

You can’t force a credit bureau to remove a collection account from your credit report before the seven-year reporting period passes. But there are strategies you can use to try to remove collections from your credit report early.

None of the following approaches below are guaranteed, of course. But they’ve all been successful for some people in the past. There’s little to lose and plenty to gain by trying.

1. Paying to Remove Collections

No law forces collection agencies (or any creditor) to share account information with the credit reporting agencies. They report accounts because it gives them more leverage to collect unpaid debts. But they can also ask the credit bureaus to remove a reported account from your reports if they wish to do so.

However, collection agencies sign agreements with the credit bureaus promising not to ask for the deletion of accurate collections in exchange for payment. Some collection agencies will make payment-for-deletion agreements anyway, but they could get in trouble with the credit bureaus if they get caught.

Still, it won’t hurt you to ask a collection agency to remove an account from your credit report if you agree to pay it. The worst that can happen is the debt collector might turn down your request.

Be prepared to pay up to 100% of the debt if you want to secure a deletion. Although debt collectors often buy unpaid debts for pennies on the dollar, you may need to offer a higher settlement amount in a payment-for-deletion negotiation. If a debt collector agrees, get the commitment in writing before you pay.

2. Goodwill Requests to Remove Collections

Although it’s a long shot, you can ask a debt collector or creditor to remove a collection from your credit report out of mercy. This type of favor is known as a goodwill request. Because the agreement isn’t based on payment, it’s a little different than a payment-for-deletion.

Requests for goodwill deletions typically work best with original creditors. It’s also normally easier to get a late payment or two removed from another otherwise well-managed account than it is to get a full blown collection or charge-off deleted.

3. Disputing Collections

The FCRA lets you dispute information on your credit report that you believe is incorrect or questionable. Some credit errors are obvious, like accounts that don’t belong to you. Other errors may be harder to spot. For example, if a collection agency reports an account that went into default 8 years ago as if it’s only 6 years old, that’s also a mistake.

Whether a credit reporting error is obvious or less apparent, it has the potential to damage your credit score all the same. You can handle disputes on your own or you can hire a professional to manage the process for you. Call 1-877-637-2673 to schedule a free credit evaluation with a Credit Saint counselor today.

If Your Efforts Aren’t Successful

Whether you work with a pro or try to remove collections on your own, there’s no guarantee you can remove every collection account from your credit report. However, that doesn’t mean you’re out of options. You can work to improve your credit in other ways while you wait for remaining collection accounts to age off your reports. A credit specialist may help guide you through these steps.

Finally, remember that collection accounts hurt your credit less as time passes. A five-year-old collection isn’t as damaging as a collection that happened a few months ago.