How to Remove Collections From Your Credit Report

Credit

Having one or more collection accounts on your credit reports can raise a red flag when it comes to dealing with future lenders and credit card issuers.

While getting a collection account removed from your credit report can be difficult, it’s not impossible. The best way to get started is by learning how collection accounts affect your credit scores, so you know how to handle them.

final notice

How long does a collection account stay on your credit report?

Collection accounts can remain on your credit report for up to seven years from the date of default on the original account. Even if you pay it in full, it’s still considered a negative account and will stay on your credit report as a paid collection account for up to seven years.

A collection account is separate from a charge off placed by the original creditor, which will likely also show up on your credit history for seven years.

How do collections affect your credit?

Most accounts end up in collections after being 120 to 180 days past due. During this time, the original creditor 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 score 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 score.

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 collections, you should receive a final notice from the original creditor.

It’s best to attempt to make payment arrangements at that time so you don’t end up with such disastrous effects on your credit score.

Can paying off collections raise your credit score?

In the past, paid collections on your credit report 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 its algorithm to ignore paid collections of all types.

With these new updates to the credit scoring models, paying off a collection account does now help your credit score. However, since it takes time for new credit scoring models to be rolled out in financial institutions, it may take time for you to see a result when applying for credit.

FICO 9 & VantageScore 4.0

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 you still owe it.

Debt buyers will attempt 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.

The FDCPA & State Collection Laws

You have rights under the Fair Debt Collection Practices Act (FDCPA) regarding timelines and statutes of limitations, so it’s critical to learn them before you act.

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 to remove collection accounts from your credit reports.

Debt Buyers

Often referred to as “junk debt buyers,” collection agencies like Midland Funding LLC go after very old debts that they’ve purchased for 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. Unfortunately, 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 on your credit report.

Debt Validation

The best way to start is to send a validation request to the debt collector claiming you owe them money. First, this step requires them to stop all collection activity.

The debt collection agency must then validate the debt and prove 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.

Reporting Limit vs. Statute of Limitations

You need to be aware of two distinct dates when it comes to collection accounts: the reporting limit and the statute of limitations.

Reporting Limit

The Fair Credit Reporting Act (FCRA) sets the reporting limit on collection accounts and is equal to seven years from the date of last activity, or DLA. Most accounts are charged off as bad debt after six months of missed payments. Therefore, you can expect to see the collections fall off your credit report seven years and six months after your last payment.

Statute of Limitations

The statute of limitations on 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 on your credit report 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 legally have to collect. If you’re not paying the creditor who currently owns the debt, the account remains as an unpaid collection account.

billing statement

Medical Bills

Debt collectors 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 collection accounts 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.

Explanation of Benefits

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 ignore bills and have them sent to a collection agency.

You can sometimes sign up for monthly interest-free payments or even ask for a reduction of costs. A balance forgiveness plan helps work with your budget through either regular payments or a lump sum in exchange for a reduced balance.

Can medical collections be removed from my credit report?

Yes. Just like anything else on your credit report, you can remove medical collections.

Pay careful attention to each piece of information associated with the debt to give yourself the best chance to get it removed. When disputing medical accounts, follow the same guidelines for any other type of collection account discussed below.

How to Remove Collections From Your Credit Report Without Paying

Here is an actual letter sent by one of the credit reporting agencies of collections that they deleted from a credit report:

removed from TransUnion

Removing a collection account from your credit report can raise your credit scores significantly. It’s often the case that there are errors on collections accounts.

So, it’s important to get a copy of your free credit report from each of the three major credit bureaus at AnnualCreditReport.com and check them thoroughly. It is not uncommon for records to be mixed up because they get passed back and forth so often among debt buyers.

Your collection accounts may not have the correct 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 on your credit reports that weren’t actually late.

Debt collectors aren’t concerned about what they do to your credit history. 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!

Disputing Collections

Under the Fair Credit Reporting Act (FCRA), it is your legal right to file a dispute for any inaccurate information 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 collection agency cannot verify the collection account, it must be removed from your credit report. Unfortunately, some debt collectors won’t even bother to verify. Furthermore, some of them don’t have the documentation to verify the negative information on your credit report.

Pay for Delete

To completely remove collection accounts from your credit report, you can also do a ‘pay for delete.’ This is simply an agreement between you and the debt collector that they remove it from your credit report once you pay the collection account in full.

The key is to make sure you get the agreement in writing. Getting an agreement over the phone won’t hold up. So, you must get the debt collector to sign off on the deal.

Need help removing collections 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 three credit bureaus for you. This means you don’t have to contact any of the credit bureaus or collection agencies yourself directly.

Credit repair companies also handle all the tracking necessary to ensure that each collection agency and credit bureau complies with the FCRA. Moreover, they make sure your credit report does not contain errors like account re-aging and multiple listings for the same collections account.

If you aren’t sure where to start regarding disputing collections, talk to one of their credit repair professionals and get your questions answered. Of course, you can do it yourself, 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 struggling with bad credit and want to learn how they can help you, give them a call for a free credit consultation at (800) 220-0084.

Lauren Ward
Meet the author

Lauren is a Crediful writer whose aim is to give readers the financial tools they need to reach their own goals in life. She has written on personal finance issues for over six years and holds a Bachelor's degree in Japanese from Georgetown University.