When you’re trying to fix your credit, having one or more collections can put a huge damper on getting your score on an upward trajectory.
While it can be difficult to get collections removed from your credit report, it’s not impossible. The best way to get started is by learning about how exactly they affect your credit so you know how to handle them.
There are some very sensitive rules when it comes to timelines and statutes of limitations, so it’s critical to learn those before you take action.
If you don’t, you could inadvertently reset the clock on your collection account. So settle in and get ready to go in-depth on everything you need to know about collections and getting them removed from your credit reports.
How long do collections stay on your credit report?
Collections can remain on your credit report for up to 7 years. Even if you pay it in full, it’s still considered a negative account and will stay on your file as a “paid collection” for 7 years.
A collection account is also separate from the original creditor’s charge off account that will more than likely also show up on your credit history.
How do collections affect your credit?
Most accounts end up in collections after four to six months without payment. During this time, your creditors may stop contacting you about the debt.
For many people, renewed collection activity comes as a nasty surprise when their debts are turned over to third-party collection agencies that use aggressive tactics.
When collections on your credit report first show up, you can expect your credit scores to drop anywhere from 50 to 100 points depending on how high your credit score was to start. The reason is that payment history has the most significant impact on your credit scores.
In general, the better your credit, the worse the hit will be. Over time, the collection account will impact your credit less and less. Before your account is sent to a debt collector, you should receive a final notice from the original creditor.
It’s best to try and make some type of payment arrangement at that time so you don’t end up with such disastrous effects on your credit score.
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What are the most common accounts that get sent to collections?
Some of the most common accounts are local utility and cable/satellite services like Comcast, Cox, Dish, DirecTV, and Time Warner. We also see a lot of cell phone services like Verizon, Sprint, AT&T, T-Mobile, and U.S Cellular on people’s credit reports.
The most common credit card accounts sent to collections are Chase, Capital One, Bank of America, Barclaycard, Citi, and American Express. Medical bills are also very common.
If you pay off a collection will it improve your credit score?
In the past, paid collections were treated the same way as unpaid collections. However, FICO has updated its credit scoring to ignore paid collection accounts. Similarly, VantageScore has recently updated their algorithm to ignore paid collections of all types.
With these new updates to the credit scoring models, paying off a collection does now help your credit score. Since it takes time for new scoring programs to be rolled out in financial institutions, it may take time for you to see a result when applying for credit.
You can always ask potential creditors which credit scores they use. If it’s FICO 9 or VantageScore 4.0, you should be able to take advantage of the lenient calculation of paid collections.
It’s still important to be careful before you decide to pay off a collection account if it’s still something that you owe.
Debt buyers will try to collect on debts that you don’t legally owe anymore so it’s important to have them verify the debt before you take action. Also, consider your state’s statute of limitations, which we’ll discuss shortly.
To completely remove any kind of negative item from your credit report, you can also do what is called a ‘pay for delete‘. This is simply an agreement between you and the debt collector that once you pay the account in full, they remove it from your credit report. The key is to make sure you get the agreement in writing.
How can you confirm you owe debt in collections?
Often referred to as “junk debt buyers,” debt buyers like Midland Funding LLC are collection agencies that go after very old debts, which they’ve purchased for as little as a few pennies on the dollar.
Then, they report the collections account on your credit report to try to get you to pay them. Sometimes they use unscrupulous practices like buying debts that you’ve already paid.
It’s not uncommon for a third-party collection agency to buy and sell the same debts multiple times. This means you could have multiple collection accounts listed for the same debt, each one lowering your credit score even further.
Finding out which of these companies actually owns your debt at any given time can be tricky. Even then, you’ll still have to negotiate with the other debt collection agencies that have posted negative information to your credit file.
The best way to start is to send a validation request to the collection agency claiming you owe them money. First, this step requires them to stop all collection activity.
Then, they must send you proof that they own the debt and that you do indeed owe it. There’s no timeline for them to return this information to you, but they can’t take any action towards collecting the funds until they do.
What’s the difference between reporting limit and statute of limitations?
There are two distinct dates that you need to be aware of when it comes to collection accounts: the reporting limit and the statute of limitations.
Although they sound similar, these two terms are very different. The reporting limit on your debts is set by the Fair Credit Reporting Act (FCRA) and is equal to seven years after the date of last activity, or DLA.
For collection accounts, this is typically seven years after the date that the account was charged off. Because most accounts are charged off after six months of missed payments, you can expect to see the collections fall off of your report seven years and six months after your last payment.
The statute of limitations on a debt varies from state to state. It can be as few as three years or as many as six (or longer for some types of debt). When the statute of limitations has passed on a debt, it is referred to as “time-barred.”
While a debt collector can continue to contact you unless you tell them to stop, they cannot legally sue you to obtain a judgment once the statute of limitations has passed. The debt may still be listed in your credit file after the statute of limitations has passed if the reporting limit hasn’t.
An underhanded debt collection agency may attempt to coerce you into paying by listing a more recent date on the account. This is known as re-aging and is illegal under the FDCPA and the FCRA.
If you try to set up a payment plan, you could open yourself up to a lawsuit by re-starting the time creditors have to legally collect. If you’re not paying the creditor who currently owns the debt, the account remain as an unpaid collection.
Collection agencies now have to wait 180 days before reporting an unpaid medical bill to a credit bureau. This gives you an extra six months to receive bills, ensure they are correct, and figure out how you can take care of them before they land on your credit reports.
Also, with the newest version of the FICO score, FICO 9, medical collections carry less weight.
When you receive your billing information from your providers, your first task is to ensure that the information is accurate. Unfortunately, it can be confusing to understand what charges your insurance company should cover and what you’ll be responsible for.
Review your bill and compare it to your Explanation of Benefits (EOB). If you’re still not sure if you’ve been charged correctly, call your insurance company and get the details of your EOB sorted out.
Once you know the true amount you owe, figure out how you’re going to pay for it. It’s better to call the medical provider directly than to ignore bills and have them sent to a debt collector.
You can sometimes sign up for monthly interest-free payments, or even ask for a reduction of costs. A balance forgiveness plan helps to work with your budget through either regular payments or a lump sum in exchange for a reduced balance.
Can a medical bill be removed from my credit report?
Yes. Just like anything else on your credit report, medical collections can be removed.
Pay careful attention to each piece of information associated with the debts to give yourself the best chance of getting them removed. When disputing medical debt, follow the same guidelines for any other type of collection account discussed below.
Can I remove a collection account from my credit report without paying?
Here is an example of collections that were deleted from a credit report:
Removing a collection account from your credit history can raise your credit scores dramatically. It’s often the case that there are errors on collections accounts. Because they get passed back and forth so often among debt buyers, it is not uncommon for records to be mixed up.
Your accounts may not have the right amount, the right date, or include any number of other mistakes that creditors don’t bother to fix. You may also have instances of late payments appearing that weren’t actually late.
Debt collectors don’t care about what they do to your credit. They only care about what it takes to get you to pay up, and they are hoping that you don’t realize that the law is on your side!
It is your legal right to file a dispute for any mistakes on your credit report with the three major credit bureaus. That includes collection accounts with false information or even any accounts that you deem “questionable.”
The credit bureau must investigate your dispute within 30 days. If the source of the information can not verify the account, it must be removed from your credit report. Some collection agencies won’t even bother to verify. Furthermore, some of them don’t have the documentation to verify the negative account.
Need help getting collections removed from your credit report?
This is where hiring a credit repair company can really make a difference. They help most people to remove collections by disputing errors with the credit bureaus for you. This means you don’t have to contact any of the credit bureaus or collection agencies yourself directly.
They also handle all of the tracking necessary to ensure that each collection agency and credit bureau is complying with the FCRA. On top of that, they make your credit file does not contain errors like account re-aging and multiple listings for the same collections.
If you aren’t sure where to start when it comes to disputing collections, talk to one of their credit repair professionals and get your questions answered. You can do it on your own, but you’re likely to have more success by enlisting professional help.
They offer a no-obligation consultation to explain what they can do to help in your particular situation.
Are collections hurting your credit score?
Lexington Law removed over 6 million collections in 2018 alone. If you’re sick of going through life with bad credit, give them a call for a free credit consultation.