How To Remove "Debt Collections" From Your Credit Report

How To Remove "Debt Collections" From Your Credit Report

A debt collection on your credit report doesn’t look too pretty; it’s sort of the ultimate red flag to potential creditors. 

You want to make sure that your credit report is in good condition for several reasons. Your credit report is what tells lenders that you’re a responsible borrower… or not. An excellent credit score will set you up as you seek to accomplish all of your financial goals.

With a blemish on your credit report, you may be limiting your ability to take out a student loan, buy your first home, or start your future business. There’s no one quick fix to removing a debt collection, but don’t stress too much; it can be done.

What Is a Debt Collection?

When you’re way past due on a debt, a creditor can turn your account over to an internal debt management and collections system or either assign or sell the debt to a collection agency. 

Once your account is sold or assigned to a collection agency, it can be reported on your credit report as a separate account, i.e., a “debt collection.”

When you’re late on unsecured accounts, such as credit cards that aren’t based on home equity and personal loans, it will go into the collection account category. If you fail to make payments on secured loans such as mortgages or auto loans, you can be subject to foreclosure or repossession.

Why Is There A Debt Collection On Your Credit Report?

If you’re confused as to why there’s a debt collection on your credit report, it may mean that there’s been an error. You’ll want to look into that and ensure that your credit report is accurate.

Typically, you’ll be called or noticed several times before your debt goes into collections.

If you’re well aware that you’ve been way past overdue on a few payments, then that’s why it’s on your credit report. Even if you eventually paid off your debt in full, a late payment can stay on your credit report for years, seven to be exact.

You’ll either have to wait it out until you’ve done your time or look for ways to remove the debt collection from your credit report before then. Seeking out a solution is why you’re here, right?

Why Is There A Debt Collection On Your Credit Report?

Does The Debt Collection Matter That Much?

A debt collection on your credit report matters big time.

The most prominent component of your credit report is your ability to make on-time payments. The exact calculation is kept a secret, but the general credit score breakdown goes as follows:

  • Your on-time payment record - 35%
  • Your credit utilization - 30%
  • Your length of credit history - 15%
  • Your credit mix - 10%
  • Your recent credit applications - 10%

A whopping 35% of your credit score can take a hit once a debt collection appears on your credit report. That means seven years of not so flawless credit and fewer opportunities available to you.

So, how do we solve this problem?

Ways You Can Remove Debt Collections From Your Credit Report

If An Error’s Been Made

If an error has been made, you most definitely should report and dispute it. You’ll need to dispute the error, which, luckily, the Credit Wizard has already conjured up an article on how to do so. You can find out how to dispute an error on your credit report here.

If Your Credit Report Is Accurate

Even if you pay off your debt, it can still show on your credit report as a “paid collection,” but this doesn’t mean all hope is lost. Paying off your debt in collections is a good first step, and you should keep record of your payments.

We’ve got three ways that you can go about removing debt collections from your credit report:


#1 Ask For a Goodwill Deletion

A goodwill deletion is when a creditor removes a negative mark from your credit report because you’ve asked nicely. You’re not likely to succeed in receiving a goodwill adjustment if your debts have been passed onto a debt collection agency, but if it’s still internal, you’re in luck.

A goodwill deletion request comes in the form of a letter that you write to the creditor. Remember that a goodwill letter only works with accounts you've finished paying. 

In the letter, you ask the collector for some help in improving your credit report. By explaining that you weren’t going through the best of times and making it clear why you couldn’t afford to pay your debts, your creditor may sympathize with you and delete the mark from your record.

In your letter, it doesn’t hurt to mention how an improved credit score will impact your life, and what opportunities your past creditor will unlock for you. It’s always nice to feel like the savior, and a forgiving creditor can surely be yours.


#2 Negotiate a Pay For Delete Agreement

If your debts have been passed over to a collection agency, you may want to consider a pay for delete agreement. When an agency buys your debt, it may pay only a fraction of what you owed on your original debt.

The way that a collection agency makes a profit is by getting you to pay off the debt. These circumstances allow you to leverage a payment in return for the agency removing the collection from your credit report.

You can go down the pay for delete route by contacting the collection agency or submitting a formal request letter, known as a pay for delete letter. When submitting a pay for delete letter, you’ll want to clearly state your offer to repay all or part of the debt in exchange for the collection agency removing the account from your credit report. 

This process is never a sure bet as pay for deletion letters don’t carry any legal weight. A collection agency can take your payment and still refuse to remove the account from your credit report. 

Always request written confirmation from the collection agency that they are willing to go through with the deal and remove the collection account before sending them any payments.


#3 Dispute After Seven Years

Unjustly, a collection agency can report an old debt as new. Well, collection agencies aren’t supposed to, but they often do; this is known as re-aging a debt.

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. If your debts have been unjustly re-aged, you should dispute it and contact the Consumer Financial Protection Bureau.

When a debt is re-aged, it appears to the credit bureaus that your account became delinquent later than it did. Sneaky re-aging keeps a debt on your credit report for longer than you deserve. Gather any proof you have regarding the first date of delinquency to strengthen your dispute.

Note: Partially repaying your debt or repaying it seven years past the delinquency can resurrect the statute of limitations and alter when your seven years of credit exposure are up. It’s important to address your position with the collection agency before moving forward.

Dispute After Seven Years

Credit Report Addressed And Ready To Go!

Hopefully, you’re able to improve your credit score by either disputing an error or using a few tactics that can get your past mistake off the books.

If all else fails, you should certainly pay off your debt because a “paid collection” always looks better than an open account. As you’re going through the process of repairing your credit report, you may want to speak with a credit counselor and take their guidance.

Some solid credit counseling will always work in your favor because the better your credit report, the more opportunities become available to you.

Don’t let a mistake from your past hold you back as you work towards a better financial future.

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