8 Steps To Get Old Debt Off Your Credit Report

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How Collections Impact Your Credit Report and Credit Scores

Your credit report is meant to give potential lenders information on how you’ve used and managed your credit responsibilities with both positive and negative information. If you pay your bills on time and keep the balances on your accounts low, your responsible credit behavior will be reflected on your credit report. However, if you’ve paid late or skipped payments altogether, that information will also appear on your report.

Late payments, skipped payments, and collection accounts are all a factor in determining your credit scores. Any kind of negative information can affect your credit scores because lenders see such information as an indication you may not be managing your credit well, such as overspending or falling behind on payments. A low credit score could make it difficult for you to obtain future credit with favorable interest rates and terms.

A late payment on a credit report is negative, and the more recent a late payment is, the greater impact it has. Accounts that get to the collection stage are considered seriously delinquent and will have a significant and negative impact on your credit report.

How To Pay Collections

If there is a collection on your credit report, the first step is to confirm it. After confirming it, you have 3 options for paying collections 1) negotiate a settlement 2) offering a lump-sum payment 3) starting a payment plan.

2. Dispute the Collection If You Found An Error

If the goodwill letter falls flat and the debt collection remains on your credit report, it’s time for a more advanced method.

For this, you will need a current copy of your most recent credit report. TransUnion, Experian, and Equifax provide you with a free credit report once a year. You can also apply for a free weekly credit report on AnnualCreditReport.com.

Once you have your credit reports, find any negative items you’d like removed and make note of them.

Confirm all the details and if you see anything inaccurate, report the inaccurate information to the major credit reporting agencies.

The Fair Credit Reporting Act (FCRA) requires credit reporting agencies to show only accurate information about your credit history.

If you can find inaccurate information, the credit bureau will have to fix the information. Though, if it can’t fix the errors, the bureau should remove the collections from your credit report.

This method can work because, rather than simply disputing the entire entry, you are going to write an advanced dispute letter that lists especially what is inaccurate.

Using this letter, you will insist that each piece of information is corrected or that the collection be removed.

This makes it more difficult for the credit agencies to verify the collection and hopefully results in them simply removing the collection altogether.

ITEMS ON THE COLLECTION ENTRY TO CHECK FOR INACCURACIES:

  • Balance
  • Account number
  • Date opened
  • Date closed
  • Account status (e.g., Closed)
  • Payment status (e.g., Collection)
  • Payment history
  • Delinquency date
  • Credit limit
  • High balance
  • Addresses
  • Anything else that appears to be inaccurate

2. If youve already paid the debt: ask for a goodwill deletion

To remove a paid collection from your credit report, you can send your creditor or debt collector a goodwill deletion letter. This is a letter where you ask a creditor or debt collector to remove a legitimate negative mark as an act of goodwill.

Send your letter to whoever owns your debt. If your original creditor transferred it to a debt collector but they still technically own it, send it to your creditor. If they sold your debt, send it to the debt collection agency they sold it to.

Creditors and collectors don’t often agree to perform goodwill deletions, but they might consider doing so if your missed payment was the result of extenuating circumstances, such as financial hardship due to medical bills, loss of employment, or divorce.

This approach is more likely to work if you previously had a good relationship with your creditor and had a good reason for falling behind on your payments. If this is the case, then you can point out your strong payment history and loyalty as a customer. You should also explain the measures you’ve taken to prevent the situation from happening again.

How Long Do Collection Accounts Stay On Your Report?

Paid or unpaid collection accounts can legally stay on your credit reports for up to seven years after the original account first became delinquent. Once the collection account reaches the seven-year mark, the credit reporting companies should automatically delete it from your credit reports.

If your collection account doesn’t fall off of your credit report after seven years, you can file a dispute with each credit bureau that lists it on your report.

How long can a debt collector pursue an old debt?

Each state has a statute of limitations about how long a debt collector can pursue old debt. For most states, this ranges between four and six years. These statutes govern the amount of time that a debt collector can sue you, but there is no limit to how long a collector has to try and collect on a debt. If you are being contacted about a debt that you believe is not yours or is outside the statute of limitations, do not claim the debt; instead, ask the company to validate that the debt is yours.

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.

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At a glance: How credit scores factor in collection accounts

VantageScore

3.0

VantageScore 4.0 FICO Score 8 FICO Score 9
Ignores paid collection accounts

Ignores medical collection accounts that are less than six months old

Weighs unpaid medical collection accounts less heavily than other types of collection accounts

Ignores small-dollar “nuisance” accounts that had an original balance of less than $100

Treats medical collection accounts, including those with a zero balance, like other collection accounts

Ignores paid collection accounts

Weighs unpaid medical collections less heavily than other types of collection accounts

If There Is Inaccurate Information on Your Credit Report

If you are hoping to delete a paid-off collections account from your credit history so that you can immediately boost your credit score, there are other ways to go about achieving that aim. While raising your score to any significant degree takes time, patience, avoiding late payments, and a dedication to good debt management habits, working with a credit repair organization can help you boost your score quickly. This is a good approach to consider if you’re trying to raise your score by a small amount to secure better terms for a major upcoming purchase and there is inaccurate information reported on your credit history.  

Hire a Credit Repair Organization

Although credit repair organizations ultimately can’t do anything that you can’t do yourself for free, working with them can be helpful if you are uninterested in making credit dispute efforts on your own. Beware of any type of credit service company that guarantees you that they can raise your credit by at least a certain amount or make negative information that is accurate disappear. It is illegal to remove legitimate negative information from your credit report, regardless of who actually does it. These firms are ultimately governed by the Credit Repair Organization Act (CROA). This means that any credit repair firm that promises to help you must adhere to the following requirements:

  • They must advise you of your rights in a written contract that clearly outlines the details of the services that they will perform

  • They must give you a 3-day right of rescission that you will have in writing, where you can cancel within the first 3 days without any fees being assessed

  • They must tell you in writing how long their services will take

  • They must tell you upfront exactly what they will charge for their services

  • They must disclose any guarantees that they make in writing before you sign any contract

If the credit repair company that you hire does not furnish you with this information before beginning to work on your credit, then you have several recourses of action that you can take. The first step is to file complaints with the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB). The FTC has the enforcement power in this case, so file your complaint with them first. Then you’ll need to file a complaint with your state’s attorney general (AG). If all else fails, you can sue your credit repair company in federal court. 

What Happens When an Account Goes into Collections?

Step by step, here’s what happens when you have an account go into collection:

  1. You miss or skip a credit card payment or fail to pay another type of bill, such as your phone bill or electricity bill.
  2. The creditor may give you a grace period during which to make good on the bill. Typically, it takes longer than 30 days for an account to be sold to a collection agency or placed into collection status. They’ll notify you, usually more than once, that you haven’t paid and ask you to pay up. If you still don’t pay, they can move your account into collections.
  3. At that point, the original creditor could turn the collection account over to a collection agency. Typically, this occurs within a few months of the original delinquency date, and the original account may appear on credit reports as a “charge off,” which essentially means the creditor has given up trying to recover the debt.
  4. Just because the original creditor has given up, however, doesn’t mean you won’t hear from a collection agency. Once they receive the account from the original creditor, the collection agency is free to pursue you for all or part of the debt, provided they adhere to federal regulations governing collections.
  5. If you’re contacted by a collection agency, you have the right to the detailed accounting of the debt they claim you owe. Contacting a collections agency won’t impact your credit report.

Virtually any type of unpaid debt can be sent to collection, including:

  • Credit cards
  • Student loans
  • Auto loans
  • Utilities
  • Services
  • Government
  • Medical

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.

When All Else Fails

If 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, wait out the credit reporting time limit, and the account will fall off your credit report.

To be sure, however, consumers can request their own credit report for free every 12 months from the three major reporting agencies. It is worth checking your report to be sure the negative information has been removed. It's also important to note that the information may still be kept on file and can be released under certain circumstances, such as when applying for a job that pays over a certain amount or applying for a credit line or a life insurance policy worth a lot. You should also check with your state Attorney General's office for more information, as state law may offer additional protections.

What Is A Charge Off On A Credit Report

A "charge-off" happens when a creditor closes an account to further use, but the debt is still owed. Often this occurs 120-180 days after payments on the debt have stopped.

What if the Information Listed on Your Credit Report Is Wrong?

It is important to immediately dispute any debt that is not being reported accurately on your credit report(s). Each credit bureau receives information from creditors, although not all creditors report to each bureau. It’s important to pull a free credit report from each of the credit bureaus on an annual basis for review, if not more frequently than that. 

If an item shows up on your report as not being paid or the amount of the debt reported is larger than the actual debt (or any other kind of inaccurate information is listed on your credit history), don’t hesitate to write a dispute letter to all three of the major credit reporting agencies (Experian, Transunion, and Equifax) as well as VantageScore and dispute the inaccurate information. The Fair Credit Reporting Act (FCRA) legally requires these companies to remove any item in question until it has been either verified or corrected. Make sure you only contest inaccurate information, though; trying to dispute accurate information will only hurt you in the long run. 

Getting Help

If you need help negotiating your debts, consider hiring a lawyer to help you. Good debt settlement attorneys have negotiation skills developed over three years of law school and many years of practical experience, as well as extensive knowledge about debt collections. And if you’re unsure about whether negotiating settlements is appropriate for your situation, an attorney can go over all of your options and give you advice specific to your circumstances. The lawyer can help you determine whether you should attempt to negotiate your debts or if you should do something else, like file for bankruptcy. If a creditorinitiates a lawsuit against youfor a debt, a lawyer can defend you in the suit.

In almost all cases, though, you should not hire afor-profit debt settlement companyor otherscammer debt-relief company.

4. Negotiate a Pay-for-Delete Agreement

When your original creditor can’t collect your past-due balance, it’ll sell your debt to a debt collection agency which means you now owe the money to the agency.

But when the agency buys your debt, it doesn’t pay the full amount. It may pay only a fraction of what you owed on your original debt.

If the collection agency can get you to pay off the debt, it makes a profit. As a result, you could leverage a payment in your negotiations.

How to Negotiate a Pay-for-Delete Agreement

You offer to pay part of your balance due in exchange for getting all negative information related to the debt off your credit report.

For this to work, you have to get this agreement in writing. An agreement over the phone won’t hold up. You could do your part and pay the agreed-upon amount only to learn the agent you spoke with didn’t make a record of the deal.

Now, if you owe $30,000 on an old credit card charge-off, you’d have a hard time coming up with a lump sum so large. Even 30 percent would still be $9,000. But this pay-for-delete strategy can help when you can afford to make a payment.

Late payments can be reported separately even though it’s associated with the same debt. Though, if you negotiate with your creditors to get a collection account removed, be sure all the negative data goes away.

How long does it take before a bill goes to collections?

There's no set time period for creditors to send your debt to collections. Once you miss a payment, you're considered delinquent, but most creditors will make several attempts to contact you and work with you to bring your account back into good standing before they send you to collections. The more you can communicate with your creditors, the better your chances are of keeping collections off your credit report.

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