Credit and collections. Yuck. This is one of those topics that no one wants to read about. If you are reading this, you are probably doing so because you need to read it. No one wants to read about bad debt or collections. But unfortunately, sometimes it is necessary. I have had to personally deal with collectors and bad debt before. Actually, I have had to deal with them on several occasions. It sucks not knowing what to do or how to deal with collection agencies. And while we will discuss how to deal with collection agencies in the future in more detail, it is important to know that you NEED to have the collections account removed from your credit report. I’ll show you how to do that.
(1) What happens when you pay a collections account?
When you pay a collections account (whether you pay it in full, settle it, or make a payment) it comes up on your credit report as a recent bad debt. And that can actually be bad for you.
If you have collection accounts that are older than three years and you make a payment or even pay them off, they will affect your credit more negatively than that account was before. This is because as a collection account gets older and older it affects your credit score less and less. If you pay a collection account it will open up that wound that is currently healing on your credit report and make it fresh and painful again. You don’t want to do this.
So what should you do?
I’m certainly not advocating that you don’t pay your collection accounts. I’m just saying that you should do them the smartest way possible.
(2) Pay it Off and Let it Go Away (Eventually)
The first option for getting a collections account removed from your credit report is to simply pay it off and let it fall off of your credit report over time.
This is not recommended.
If you simply call up the collection agency that you are working with and pay it off it will open up the collection account wound on your credit report again. Yes, the account will be paid, but it will hurt your credit report for quite a while. (I know it sounds ridiculous, but it’s true.)
If you just pay off the collection account and let it fall off your credit report it will take seven years! Don’t wait seven years to have your credit healed.
I have seen a lot of people do this before. What usually happens is that someone is going to get a house or maybe a car and they get their credit report only to find out that they have a collection account (or multiple collection accounts). And like a good and responsible person, they start calling the collection accounts and paying them off.
It is the responsible thing to do but unfortunately, it is not the wisest.
(3) Ask the Agency to Remove the Collections Account
Asking the collection agency to remove the account is the preferred method of paying a collection account.
When you call the collection account, negotiate for them to remove the account from your credit report altogether. You will have to pay the account off (either in full or settled for a lesser amount). Usually collection agencies will remove the account altogether. It will be like you never had that bad debt on your credit report at all!
If you have collection accounts, this is the fastest way to increase your credit score, btw.
The negotiation for removing a collection account is usually not that difficult. The negotiation for the amount that you want to settle on is usually more difficult.
Collection agencies buy thousands of collection accounts for pennies on the dollar and then try to collect on those debts as much as possible. Removing a collection account from someone’s credit report is a standard operating procedure for them.
(4) Dispute the Collections Account
This is the final way to remove a collection account from your credit report. But let me preface with: only do this if the debt is mistakenly being reported.
Do not dispute a debt with the hopes of removing it from your credit report if you do actually owe the money. Trying to have collection accounts removed from your credit report that you really do owe is both unethical and illegal.
But if you really do not owe the debt that is being reported, simply dispute it on the Experian, TransUnion, and/or Equifax websites. They will perform some research to validate what you are claiming and then remove the account in a month or two (three months at the max).
I have had to do this and it really is a pretty painless process. I disputed the accounts in about 15 minutes or so and they were removed from my credit reports in about 10 days.
Final Thoughts
Collection accounts can be really stressful. I get it. I’ve been there. But don’t worry. Just work your way through them. When I started taking care of my collection accounts, I started with the smallest collection account and worked my way toward the largest. It took a little time, but over a few months I was able to take care of all of them and have each one removed from my credit reports.
Once you get to this point, you will feel like a huge weight has been lifted off of your shoulders.
I promise.
The best part is that you can do it. 🙂
I will do my best to help you as much as I can.
Until next time!
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