Removing Collections from Credit Reports

Debtsin collections are a common form of debt in the United States. About thirty-five percent of people have a type of debt in collections.

But what is a collection, and why should you remove it? Is it important?

Having a debt in collections can seriously harm your credit score and report. Avoiding your late payments and debt collections is the best way to safeguard your credit report, nonetheless,when something falls through the cracks, and you get a debt in collections, you still have some options.

 

Collections: Explained

When consumers do not pay their credit cards off every month or their checks bounce, this debt becomes delinquent. If the debt is not paid for several months, creditors can either 1) turn the debt over to their internal collection department or 2) sell the debt to a collection agency. Either way, the delinquent debt moves to a separate account on the credit report called collections. This placementseverelyharms credit scores

When a debt goes into collections, it is no longer the responsibility of the creditors to make sure the money is repaid. Now, the collectors will pursue those payments.

 

Collection Agencies: What They Do

Who are the “collectors?” Collectors are people working for a collection agency whose primary focus is to recover delinquent funds from borrowers who either have not paid up or have defaulted their accounts.

Collection agencies must follow specific rules and regulations when seeking payments, according to the Fair Debt Collection Practices Act (FDCPA).

Here’s what they can do:

 

  • mail you late-payment notices
  • call your personal and work phones
  • knock on your front door
  • contact family and friends to verify your information
  • reach out to your employer about your taxes and other monetary issues
  • try to collect on old payments after the statute of limitations has expired

Here’s what they cannot do:

 

  • try to collect on payments when you cannot be located, you have filed bankruptcy, or your debt has been labeled “uncollectible.”
  • sue or threaten to sue unless payments are made
  • physically threaten for payments
  • perform a legal seizure of assets, unless you lost a lawsuit against the collectors
  • contact you at work if you expressly stated your employer disapproves of such calls
  • call you at any time except between 8 A.M. and 9 P.M.

 

What You Need to Know

According to Debt Collection Answers, there are 4,100 collection agencies in the United States, and the industry is projected to grow twenty-six percent in the next three years. In 2015, the consumer complaints concerning debt collection rested at twenty-nine percent. Over the past few years, success rates for recovery of delinquent debt declined to twenty percent. In short, the collection business is difficult for both debtors and collectors.

The drop in collection removal rate and the rise in consumer complaints may indicate a populace that does not know what collections are or how to handle them. Removing collections is very important.

Past-due payments and collection accounts make up thirty-five percent of your credit score, costing you 100 points or more. A low credit score makes it difficult for you to obtain a mortgage or other types of loans. In other words, removing a collection can spring-board your credit report and score significantly. However, if you already have a low credit score, collections do not affect you as much.

 

How to Remove the Problem

There are three simple ways to remove debt collections.

1) Within the first 30 days of a collection department or agency contacting you, send them a letter requesting they validate your debt. Mistakes in debt collection are common, and you want to make sure that the debt collection is not a scam. It says in section 809 of The Fair Debt Collection Practices Act, collection agencies must give you validation if you ask them to. If they validate your collection, then it is accurate, and you need to pay it. However, if they cannot validate it, you may request that they remove the collection.

2) Or, send them a letter of goodwill. Explain your situation and why you were unable to pay off the debt promptly. If you have paid the debt, mention that the collection is paid off. The low credit score may be keeping you from making a large purchase or taking out a loan, so explain why you need the collection renewed. Reiterate and go into further detail on the situation that kept you from paying. Be courteous and respectful in your goodwill letter. Nothing is more unconvincing than a rude letter that is demanding something.

3) If the letter of goodwill is rejected, comb through your credit report and note every inconsistency and problem. Make a note of everything in great detail. If the collection agency got the amount of debt wrong, note it. If they failed to mention the date of first delinquency—when you first failed to pay the debt— note it. Send them a letter that is detailed and accurate, explaining why they must update and correct the report or remove it. Inconsistencies in the report make it difficult for the collection agencies to upkeep your debt collections and may cause them to remove it.

If all your attempts to remove the collection fails, pay off the debt anyway. Having a paid-off collection on your credit report is not good, but it’s better than having an unpaid one. It shows creditors that you have taken care of your business and makes them more likely to do business with you than if you hadn’t paid it off. And after seven years, the collection will be removed from your credit score. So, things will eventually improve.

Once your collection has been removed, play it safe and keep up with your payments. The best way to remove a collection is to avoid it altogether. And in case of unforeseen circumstances, save up an emergency fund to safeguard you from any hassle or debt collections. If you have any concerns or if you are looking for professional advice, get in touch with us today.Contact us 844-829-2292