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How to Remove Collection Debt from Your Credit Report
by
JG Wentworth
•
October 31, 2024
•
6 min
Having collection debt on your credit report can be a significant obstacle to achieving your financial goals. It can lower your credit score, make it harder to obtain loans or credit cards, and even affect your ability to rent an apartment or get a job.
But take a deep breath… Let’s walk you through the process of removing collection debt from your credit report, exploring various strategies and their potential outcomes so that you can move forward with confidence.
Collection debt on your credit report
Before diving into removal strategies, it’s crucial to understand what collection debt is and how it appears on your credit report. Collection debt occurs when an original creditor, such as a credit card company or utility provider, gives up on collecting a debt from you and either:
- Assigns the debt to a collection agency
- Sells the debt to a debt buyer
Once this happens, the debt is considered to be “in collections,” and the collection agency may report this debt to the credit bureaus.
How collection debt appears on your credit report
When a debt goes to collections, it typically appears on your credit report in two ways:
- The original account may be marked as “charged off” or “transferred to collections.”
- A new entry from the collection agency will appear, showing the collection account.
Both of these entries can negatively impact your credit score, so let’s go over how you can fix this…
Strategies for removing collection debt from your credit report
Now that we understand how collection debt appears on a credit report, let’s explore strategies for removing it:
1. Verify the debt
The first step in any attempt to remove collection debt should be to verify that the debt is actually yours and that the information reported is accurate.
Steps to verify the debt:
- Request a copy of your credit report from all three major credit bureaus (Equifax, Experian, and TransUnion).
- Review the collection entries for any inaccuracies in the debt amount, date of delinquency, or your personal information.
- If you don’t recognize the debt, or if there are inaccuracies, proceed to the dispute process.
2. Dispute inaccurate information
If you find inaccuracies in the collection entry, you have the right to dispute this information under the Fair Credit Reporting Act (FCRA).
How to file a dispute:
- Write a dispute letter to the credit bureau(s) reporting the inaccurate information.
- Clearly explain what information you believe is inaccurate and why.
- Include any supporting documentation that proves your case.
- Send the letter via certified mail with return receipt requested.
The credit bureau has 30 days to investigate your claim. If they can’t verify the information, they must remove it from your credit report.
3. Request debt validation from the collection agency
Under the Fair Debt Collection Practices Act (FDCPA), you have the right to request debt validation from the collection agency within 30 days of their first contact with you.
Steps for debt validation:
- Send a debt validation letter to the collection agency.
- Request proof that you owe the debt and that they have the right to collect it.
- If they can’t validate the debt, they must cease collection efforts and remove the entry from your credit report.
4. Negotiate a pay-for-delete agreement
While not always successful, you can try to negotiate a pay-for-delete agreement with the collection agency.
How it works:
- Contact the collection agency and offer to pay the debt (or a settled amount) in exchange for them removing the collection entry from your credit report.
- If they agree, get the agreement in writing before making any payment.
- Follow up to ensure they’ve removed the entry as agreed.
Note: Many collection agencies won’t agree to this as it may violate their agreements with the credit bureaus.
5. Goodwill deletion
If you’ve already paid the collection debt, you can try requesting a goodwill deletion.
Steps for goodwill deletion:
- Write a letter to the collection agency explaining your situation and why the debt went to collections.
- Highlight your current good payment history and responsible financial behavior.
- Politely request that they remove the collection entry as an act of goodwill.
This method is most effective if you have an otherwise good credit history and the collection was due to a one-time hardship.
6. Wait it out
If all other methods fail, remember that negative information, including collections, must be removed from your credit report after 7 years.
Timeline for removal:
- The collection entry should fall off 7 years from the date of first delinquency on the original account.
- This date should not reset if the debt is sold to a new collection agency.
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What to do if the collection debt is valid
If the collection debt is valid and you can’t get it removed, consider these steps:
1. Pay or settle the debt
While paying a collection doesn’t remove it from your credit report, it can have some benefits:
- It stops further collection efforts.
- Some newer credit scoring models ignore paid collections.
- Future lenders may view paid collections more favorably than unpaid ones.
2. Request “paid in full” or “settled” status
If you pay or settle the debt, make sure the collection agency updates the credit bureaus to show the account as “paid in full” or “settled.”
3. Add a consumer statement
You can add a brief explanation (100 words or less) to your credit report explaining the circumstances of the collection.
The bottom line
Removing collection debt from your credit report can be a challenging process, but it’s not impossible. Start by verifying the debt and its accuracy, then explore options like disputing inaccuracies, requesting debt validation, or negotiating with the collection agency. Remember, even if you can’t remove the collection, you can take steps to minimize its impact and rebuild your credit over time.
Be patient and persistent. Improving your credit is a journey, not a quick fix. With time and responsible financial habits, you can overcome the impact of collection debt and achieve your financial goals.
There’s always JG Wentworth…
Do you have $10,000 or more in unsecured debt? If so, there’s a good chance you’ll qualify for the JG Wentworth Debt Relief Program.* Some of our program perks include:
- One monthly program payment
- We negotiate on your behalf
- Average debt resolution in as little as 48-60 months
- We only get paid when we settle your debt
If you think you qualify for our program, give us a call today so we can go over the best options for your specific financial needs. Why go it alone when you can have a dedicated team on your side?
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The information is provided for educational and informational purposes only. Such information or materials do not constitute and are not intended to provide legal, accounting, or tax advice and should not be relied on in that respect. We suggest that You consult an attorney, accountant, and/or financial advisor to answer any financial or legal questions.
* Program length varies depending on individual situation. Programs are between 24 and 60 months in length. Clients who are able to stay with the program and get all their debt settled realize approximate savings of 51% before our 25% program fee. This is a Debt resolution program provided by JGW Debt Settlement, LLC (“JGW” of “Us”). JGW offers this program in the following states: AL, AK, AZ, AR, CA, CO, FL, ID, IN, IA, KY, LA, MD, MA, MI, MS, MO, MT, NE, NM, NV, NY, NC, OK, PA, SD, TN, TX, UT, VA, DC, and WI. If a consumer residing in CT, GA, HI, IL, KS, ME, NH, NJ, OH, RI, SC and VT contacts Us we may connect them with a law firm that provides debt resolution services in their state. JGW is licensed/registered to provide debt resolution services in states where licensing/registration is required.
Debt resolution program results will vary by individual situation. As such, debt resolution services are not appropriate for everyone. Not all debts are eligible for enrollment. Not all individuals who enroll complete our program for various reasons, including their ability to save sufficient funds. Savings resulting from successful negotiations may result in tax consequences, please consult with a tax professional regarding these consequences. The use of the debt settlement services and the failure to make payments to creditors: (1) Will likely adversely affect your creditworthiness (credit rating/credit score) and make it harder to obtain credit; (2) May result in your being subject to collections or being sued by creditors or debt collectors; and (3) May increase the amount of money you owe due to the accrual of fees and interest by creditors or debt collectors. Failure to pay your monthly bills in a timely manner will result in increased balances and will harm your credit rating. Not all creditors will agree to reduce principal balance, and they may pursue collection, including lawsuits. JGW’s fees are calculated based on a percentage of the debt enrolled in the program. Read and understand the program agreement prior to enrollment.
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