When you default on your credit card payments, your credit issuer cannot foreclose your house (mortgage loan) or seize your car (auto loan) but they can take measures that will hurt your reputation and credit score. Your payment history accounts for 35% of your score; so it impacts your credit score more than any other factor. Once your payments are 180 days past due, your issuer applies what is called a charge-off and can take it further by sending your account to Debt Collectors.
The debt collector will then have the job of pursuing you for payment by calling you and sending letters, sometimes even making an offer to settle on the debt. Having a debt collection on your credit report hurts your credit score. Even though a collection will affect your credit less as it gets older, the entry will remain on your credit report for seven years for future creditors and lenders to see and scrutinize. The most ideal option is to remove debt collections from your credit report.
Dispute If It’s Not Your Collection | Removing Debt Collection From Your Credit Report
First of all, you need to scrutinize your credit report. If it’s not your debt, you’re not required to pay it and collectors aren’t allowed to list it on your credit report. Use a credit report dispute to have the credit bureaus remove the debt from your credit report for good. Provide copies of any evidence you have proving the debt doesn’t belong to you.
Even if the debt belongs to you, that doesn’t mean the collector is legally able to collect from you. If the debt collector first contacted you within the past 30 days, you can request debt validation. This process requires the collector to provide proof that you owe the debt. If the collector can’t validate the debtor doesn’t respond to your request, the debt has to be removed from your credit report.
Dispute After Seven Years | Removing Debt Collection From Your Credit Report
According to the Fair Credit Reporting Act (FCRA), past-due accounts can only remain on your credit report for seven years from the first date of delinquency. Some collectors often try to re-age a debt, making it look like the account became delinquent later than it actually did. This keeps the debt on your credit report longer.
If the seven-year reporting period is up (starting from when you first went delinquent with the original debt), dispute the debt from your credit report. Any proof you have regarding the first date of delinquency will strengthen your dispute.
Dispute When Collectors Sell | Removing Debt Collection From Your Credit Report
Collection accounts often change hands every six months or so. Debts are assigned and sold to other collectors, so there’s a strong possibility the collection agency listed on your credit report isn’t the agency that’s currently collecting on the debt. When this happens, you can typically have the older collection removed by disputing it with the credit bureaus. If the debt collector fails to respond to the dispute, the credit bureau should remove the account since it has not been verified.
Pay for Delete
If you can’t remove the debt by disputing it, you can negotiate with the collector to have the account removed from your credit report in exchange for payment. Send the collector a letter stating your interest in paying the account. Offer to make the payment if the collector agrees to remove the entry from your credit report. If the debt collector agrees, ask for a signed copy of the letter to you to seal the agreement.
If you negotiate a pay for delete over the phone, make sure you get the agreement in writing before you make payment. Don’t make payment based only on an oral agreement.
Send all correspondence to the debt collector via certified mail with the return receipt requested. That way, you have proof if there’s ever a question about whether the debt collector received your mail. After you’ve paid the collection, check your credit report to make sure the entry has been deleted. If not, dispute it and provide the credit bureau with a copy of your agreement with the debt collector and proof of payment.
Ask for a Goodwill Deletion
It may be a long shot, especially with collection agencies, but a goodwill deletion request is another option for having debt collections removed from your credit report. A goodwill letter works with accounts that you’ve already paid. In the letter, you essentially ask the collector to show some mercy, perhaps because you fell on hard times after a major life change, and remove the collection from your credit report.
When All Else Fails, Pay it
After you’ve tried all the options listed above but you’re not able to get the collection account removed from your credit report, pay it anyway. A paid collection is better than an unpaid one and shows future lenders that you’ve taken care of your financial responsibilities. Once you’ve paid the collection, just wait out the credit reporting time limit and the account will fall off your credit report.