How to Remove An Unpaid Collection From Your Credit Report?

According to federal law, getting an unpaid collection removed from your credit report can take up to 7 years from the day the debt became delinquent. While in instances you filed for a chapter 13 bankruptcy, this period can extend to 10 years.

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Even if you pay the debt you owe, the collection will take the same period to come off your credit report. That’s why it’s vital to understand how to get an unpaid collection removed from your credit report.

In this article, we’ll discuss the possible ways of removing a collection from your credit report but first, let’s understand what it means for your account to go into collection.

What it Means to go Into Collection

Regarding personal finances, borrowing a loan is an easy option but not repaying it. It’s always a steep slope to climb. You can blame it on harsh economic conditions, but loan providers open a collection account if you don’t repay the loan on the agreed schedule.

The purpose of a collection account is to try and recover the overdue loan. Recovering overdue loans is done by;

• Having an internal debt collection agency.
• Hiring a debt collection agency to recover the overdue loan.
• Selling off the overdue loans to one of the over 6,000 third-party collection agencies.  

It is typical for all types of loans to go into collection. It can include the following type of debt;

• Student loans
• Medical bills
• Auto loans
• Credit cards

The Fair Debt Collection Practices Act governs and regulates credit reporting agencies from practicing abusive and unfair acts against the debtor. This includes issuing threats of imprisonment if you don’t pay up the loan. However, lenders can report you to a collection agency resulting in a collection account.

Usually, lenders give you a grace period of not less than 30 days to clear your old debts, after which they report you to a debt collection agency.

The collection accounts will show up in your credit report, which results in a bad credit report due to late or missed payments limiting your chances of being approved for a loan or credit. Therefore, knowing how to get an unpaid collection removed from your account is crucial.

How Can You Remove Collections From Your Account?

Since collection accounts limit your credit, you must remove them from your credit information to qualify for a loan. However, this process may be subject to failure depending on the status of your delinquent loan.

When you’re setting out to remove the collection account, consider going through the following procedures;

1. Verify your credit reports
2. Dispute the report and ask for validation from the collection agency
3. Send a goodwill deletion letter to the collection agency
4. Be patient and wait for the collection claim to fall out of your credit information
5. Hire an attorney

Let’s delve into each of these processes!

1. Verify Your Credit Reports

To get insights into your collection account, you must have access to your credit report. All you have to do is log into AnnualCreditReport.com. The Consumer Financial Protection Bureau (Cfpb) also mandates credit bureaus to give free credit reports on an annual basis.  

You can gather your credit report from all three major credit bureaus, which include the following;

• Equifax
• Experian
• TransUnion

These credit bureaus can give you a free credit score report if;

• You think you have inaccurate information on your credit due to fraud
• You receive a denial notice to employment, insurance, credit, or any other adverse action due to your credit report. If so, it’s your right to get a free credit score report from the collection agency identified in the notice. Do this within 60 days from the day you receive the notice.
• You’re applying for employment opportunities within 60 days from the date you requested a free copy of your credit report.
• You’re entitled to a free credit report by your state laws.
• You have access to public welfare assistance.

You should request a credit report from all three major collection agencies to check for any adverse reports that may have resulted in opening a collection account. Check the following details for any red flags;

• The account details, for example, the account number. Is it yours or not?
• Your account status. Did you pay, close, or it’s a charge-off account?
• The date when the debt went delinquent and remained delinquent.

Once you validate these details, you can dispute the credit report or ask for validation from your debt collector.

2. How to Dispute or Validate the Credit Information

You can dispute your credit information if you disagree with the debt-collecting statement in your credit report. This can be a result of account errors.

Scenarios of account errors that can lead to a credit dispute are;

• Incorrect account details, for instance, the name or account number.
• Incorrect loan balances or credit limits.
• Wrong residential addresses you’ve not lived in and accounts you don’t recognize. This may symbolize identity theft.
• Wrong account status. Maybe you paid off your debt on time, yet debtors reported it as a late repayment.
• Old information that is past the statutory requirements- we’ll get to that in a minute.

If you see any errors in your credit information, dispute the report by contacting the collection agency that filed the report. Of course, you must have supporting documentations to back your dispute. Disputes can be filed online or by sending a 609 dispute letter.

Remember, you’ve got 30 days to file for a dispute. Once you file for a dispute, the credit bureaus or debt collectors have 30 days to validate their collection claims or risk such claims falling off your credit report.

If you suspect the report has errors due to identity theft, contact the Federal Trade Commission to get a recovery plan.

Credit bureaus will remove the unpaid debt collection from your credit report when the dispute is successful. But what should you do when the collection claims are valid?

3. Goodwill Deletion Letters

Once you validate your credit information and find that all its details are genuine, you can pay for delete. This is helpful since your original account will display the collection details for seven years, even after paying off your old debts.  

Most lenders will consider this negative report in their credit scoring models, thus, limiting your chances of being approved for a loan. While others use new credit models to determine how much they can lend you.

To avoid having a low FICO score, send a goodwill letter of deletion to your original debt collector or credit bureau. A goodwill deletion letter asks them to remove the late repayment remarks from your credit report since you’ve cleared your debts, including your credit card debt.

You should note that credit bureaus and debt collectors aren’t obliged to honor this request, but it doesn’t hurt to try since it’ll improve your vantage score. So, chin up and send that goodwill deletion letter with the hopes of positive feedback.

4. Patience Pays

Another easy but long method of removing your unpaid collection from your credit report is waiting until it reaches the statute of limitation. The statute of limitations varies across each state, but ideally, it’s after seven years.

However, this process isn’t that simple. For it to be valid, your account must remain delinquent until seven years pass. This can be difficult since debt collectors may take you to court before this period elapses.

If you decide this is your best option for removing unpaid collections from your credit report, you shouldn’t make any payments toward the loan balance. If you do, you reset the clock towards the statute of limitation and extend the shelf life of your delinquent loan to remain valid for collection.

The only negative impact of this process is that it will hurt your credit score, but this impact will reduce as time goes by.

5. Hire an Attorney

Hiring an attorney can be a life savior when removing an unpaid collection claim from your credit information. Though you can do it yourself, the effectiveness of hiring an attorney is unmatched as they might give you insights into avoiding such instances in the future.

All you must consider is the professionalism and authenticity of the attorney you hire.

FAQs About Unpaid Collections

What are the benefits of removing a collection from a credit report?

The five benefits of removing a collection from a credit report are;

• You will stop collection companies from hustling you with their calls and emails.
• You’ll have access to loans and credit cards.
• FICO score and vantage score will improve, hence accessing higher-limit credits.
• You’ll be avoiding a lawsuit that can damage your financial reputation for seven years.
• You’ll be on your way to a debt-free life by paying off one debtor. This means you’ve got more financial muscle to flex.

Will my credit score go up if a collection is removed?

One way to have a credit repair is by clearing your old debts. As a result, your consumer credit reports will improve, and credit bureaus will give you a good credit score.

Your credit payment history accounts for 35% of your FICO and vantage score, while the length of your credit history accounts for 15% of both scores. Major credit bureaus use these metrics to come up with accurate information on your credit score.

Can collections come back after being removed?

Deleting collections can come back after being removed from your credit report. Creditors are given a 30 to 45-day investigation period to validate a collection claim. They also have five working days to respond to your claims once you’ve started the dispute process.

If the original creditor fails to validate the information, credit bureaus will remove the collection report from your credit profile, but that doesn’t mean lenders can’t return the collection claim by filing another claim.

Will unpaid collections fall off the credit report?

Unpaid collections can fall off credit reports if you ask your creditor for a goodwill deletion explaining your circumstances and they decide to honor it.

What does it mean when a collection account is removed?

Federal law mandates that credit bureaus remove unpaid and paid collection accounts that are delinquent for seven years. This means that you’re not liable to pay the loan balance, and your credit score won’t suffer any negative impacts due to the removal of the collection.

Conclusion on How to Get an Unpaid Collection Removed From Your Credit Report

As you know, applying for a loan is easy, but it can be daunting when it comes to paying it back. You might hurt your credit score in the long run since debtors report late payments to credit bureaus. Worse is that your loan may become delinquent, resulting in a collection claim by your creditors. This can also lead to a common question that we get, which is, “can I get a mortgage with collections?” Be sure to read our guide that will help answer this and more about unpaid collections and debt.

At the end of the day, removing these collection claims from your credit information is lengthy, but it’s possible with the five ways of removing collections from your credit report discussed above. I hope you’ll practice them to get a debt-free life.

Related: How to remove a charge-off from your credit report without paying