If you have collection accounts on your credit reports, there’s no doubt you just want them to go away. And the other big question is how long collections stay on your credit report. While we have some tips for you on how to remove collections from your credit report, it’s important to keep in mind that, by federal law, they can be reported for seven and a half years from the date you first fell behind with the original creditor.
That seven-and-a-half-year timeframe probably feels like forever. Therefore, the idea that you can get the collection agency to remove the account if you pay it could be appealing, but it’s trickier than you may think.
The first step to dealing with this situation and removing collection accounts from your credit report is to get copies of all of your credit reports and credit scores so you can understand exactly what’s being reported by the three major credit bureaus and how it affects your scores.
You can get a free credit report every year from each of the major credit reporting agencies – Equifax, Experian and TransUnion – and you can get two free credit scores (from Experian and VantageScore 3.0) anytime at Credit.com.
In short, what works is writing a pay for delete letter, waiting it out, and asking for removal due to goodwill (more on that later). What generally helps, but doesn’t benefit your credit report, is paying off a collection normally, without getting it removed.
How to Pay for Removal of Collection Accounts
Consumers sometimes ask a collection agency to remove the collection account from their credit reports in exchange for payment. Sometimes collection agencies make this kind of offer, but usually, it’s the debtor who tries to negotiate a pay for removal deal.
Collection agencies will often respond to this request by stating that they are unable to remove the negative information. To a larger extent, that’s true. The credit reporting agencies prohibit this activity since they have contracts with these collection agencies. (Otherwise, collection accounts would be removed all the time and credit reports would not accurately reflect the consumer’s creditworthiness.)
If you choose to pay for delete, then ensure you have the agreement in writing, so you have proof of what the collector agreed to do for you.
At the same time, collection agencies can’t report information that’s inaccurate or incomplete on your credit file. So, if you found yourself with a collection account on your credit report because you had a legitimate dispute with an original creditor or service provider, it’s perfectly reasonable to request that collection account be removed if you pay the bill, so it does not continue to adversely affect your credit.
If you have extremely great credit history, barring an isolated error or short series of late payments, you might consider writing a goodwill letter to the original creditor. Having paid the debt and being able to prove you’re not a risky borrower looks good to a creditor, and they might remove the negative items from your credit report out of goodwill.
Asking for a goodwill deletion or adjustment to your credit file sounds better to creditors since requesting they remove negative items from your reports is actually against the rules put in place by the credit reporting agencies.
Send the letter by mail, preferably with a receipt or certified mail, so you know it arrives. Use the address on your credit report, but double check that it’s correct on the creditor’s website.
This strategy has more success than you might imagine, so if your credit history is promising, consider this option. Look online for successful goodwill letters to use as templates to expedite the process even further.
Paying Off Collections
Unfortunately, simply paying a collection account without getting it removed often won’t improve your credit scores. With few exceptions, as long as a collection account is listed on your credit reports, it’ll have a negative impact on your credit scores.
Make sure you keep evidence of the date of the delinquency because a collection agency may attempt to push back the start date and keep the debt on your credit report for an extended period of time.
While it’s discouraging to know that paying collection accounts won’t help your credit scores, keep in mind that as this information gets older, it’ll have less and less of an impact. That’s particularly true if you’re building new, positive credit references.
Disputing a Collection
First of all, if the collection or debt on your credit report isn’t yours, don’t pay it. Have the credit bureau remove it from your account after you formally dispute it. If a collector keeps a debt on your credit report for an extended period of time – past seven years – you can dispute the debt, and have it removed, especially if you have proof of the start of the delinquency.
If anything at all on the collection is inaccurate, make a note and demand that the information be updated, or otherwise the collection should be removed. Sometimes when creditors go back to look at collections, they can’t validate them, and then they’re required to remove them entirely. This fact also applies within the first 30 days of receiving notice of a collection.
You should immediately contact the collector and request debt validation because if the collections agency doesn’t respond, or they can’t prove that you owe anything, they’re also forced to remove the debts from your credit report.
How Long Do Late Payments Stay on Your Credit Reports?
Like collection accounts, late payments can remain on your credit reports for up to seven years and also have a negative impact on your scores. Additionally, both have a lesser impact as they get older.
It’s good to keep in mind that not all late payments are equal. A payment that is 30 or 60 days late isn’t going to affect your credit score as much as a payment that’s 90 days past due.
Also, if any of the information reported about a collection account (or late payments) to the credit reporting agencies is inaccurate or incomplete, you have the right to dispute that account with the agencies. They must verify the information with the source.
If the source doesn’t confirm the information within 30 days, the credit reporting agency must remove it. Some agencies won’t bother to verify older closed collection accounts.
VantageScore 3.0 & FICO 9: Hope for Consumers?
If you’re unaware, VantageScore 3.0 and FICO 9 are credit scoring models that use extremely relevant data from the three major credit bureaus to calculate your accurate credit score.
The newer FICO score models ignore collection accounts where the original balance is less than $100. Thus, eliminating some nuisance collection accounts, such as small parking tickets or unpaid library fines, from hurting your credit scores.
Along similar lines, the new VantageScore 3.0 credit score ignores all paid collections accounts, as well as any collections, paid or unpaid, under $250. But you rarely know what credit scoring model is being used when you apply for a loan, credit card, mortgage or auto loan, so you can’t necessarily bank on these models’ rules. Either way, just know there’s some chance that your score won’t even take hits from collections.
Even if paying one of these balances off won’t help your scores, it may still be a good idea to resolve a collection with a debt collector, especially if you’re at risk of being sued for the debt, or you are in danger of receiving a tax lien. You’ll want to avoid creating even more problems for your credit and your finances.
Hannah Maluth contributed to this article. This article has been updated. It was originally published November 9, 2016.