Are debt collectors hounding you? Do you fear that your creditors will take you to court? Then you need to work on resolving your delinquent credit accounts.
You can take action to resolve collections and sometimes remove the collections from your report. Here’s what you need to know about removing collections.
You have the right to an accurate credit
If you receive calls about a debt you don’t recognize, then you’re the victim of identity theft or mistaken credit. As a consumer, you have the right to an accurate credit report.
The Consumer Federal Protection Bureau protects your rights to an accurate report. They provide guidance on how to remove inaccurate information from your report.
Start by pulling your free credit report from all three credit reporting bureaus at AnnualCreditReport.com. Review, the reports and determine what items in collections are not your debts.
Remember, you need to contact all three credit bureaus, and provide them with as much information as you can.
If it’s overwhelming to do this work on your own, you can enlist the services of Lexington Law to file the dispute letter and follow up on your behalf. These services cost $79.95 per month, and you can stop the service as soon as they fix your credit.
After that, you should watch your credit using a free service like Credit Sesame.
How collections items affect your credit score?
If you have real collections items, removing them from your report can be more difficult. Most people will not succeed in having the original delinquent account removed from their report. Therefore, removing items in collections should be part of a holistic effort to improve your credit score.
Your credit score includes five parts:
- Payment History (35%)
- Credit Utilization (30%)
- Length of Credit History (15%)
- Variety of Credit Types (10%)
- Credit Inquiries (10%)
Collections items hurt the payment history component of your score.
The best way to increase this part of your score is to pay all current accounts on time.
The next best way to improve your score is to pay down as much debt as possible.
If you have extra cash in your budget, then you should start working on delinquent items. It’s important to note:
Your credit score will not increase by resolving items in collections. You need remove them from the report.
How to resolve collections from your credit report?
Once you have the extra money, work on removing duplicate instances of the same debt. Since creditors buy and sell debt, they may report a single debt many times. In this case, you need to dispute the duplicate instances.
You can also remove this information on your own by following CFPB guidelines on disputing credit report errors. Use the FTC’s example of a dispute letter when you’re drafting your own letters. It’s important to save all your correspondence with Credit Bureaus and creditors.
In general, the original collection item will remain on your credit. When you pay the item in collections you may be able to negotiate for its complete removal.
Most collectors buy your delinquent debts for pennies on the dollar. They want to get as much money from you as they can get. You can use this to your advantage.
Negotiate with creditors
When negotiating a settlement, aim for a settlement amount less than 50% of the original debt. (If you owed $2000, try to settle on $1000 or less).
Once the creditor accepts, ask if they will remove the delinquent account from your credit report for a 10% increase in settlement. In that case both you and the creditor will win.
Remember that after 7 years, the delinquent debt will fall off your credit score. It never hurts to ask for removal in exchange for giving more money, but it will be removed either way.
You may not be able to negotiate for the removal of the negative item. But, over time, the impact of the item in collections will decrease until it falls off your record.
Other things to remember
As a consumer you have the right to an accurate credit report. This means the FTC and the CFPB will help you remove incorrect or illegal information. You can remove duplicate or fraudulent collections items.
You should also remember that your rights don’t stop with accuracy. Laws limit what debt collectors can say or do. When negotiating with collectors remember that they want your money more than anything else. It never hurts to ask for a removal.
Finally, remember that a great credit score depends on you making great credit choices. Pay current debts before you focus on removing collections from your credit report.
If you don’t have any current accounts, consider applying for a secured credit card which will allow you to start a history of good credit.
Even if you can’t negotiate for removal, a collections item will fall off your report in seven years.
You can achieve excellent credit, even if you had a collections item on your credit report. Take the steps to establish excellent credit, and work to remove collections items as you have the money to resolve them.