Here’s What You Can Do If You Have Collections on Your Credit Report

If you see an account in collections on your credit report, it’s understandable to feel stressed. Collections, even when paid, can potentially lower your credit score and impact your approval odds for mortgages, auto loans and credit cards.

However, collections don’t stay on your credit forever, and you can remove them if they shouldn’t be there. Knowing when and how to remove collections from your credit report can help ease stress and potentially increase your credit score.

Before you take steps to remove collections from your credit report, you need to know which credit bureaus are involved. You can review your credit files at all three of the major credit bureaus – Experian, Equifax and TransUnion – via AnnualCreditReport.com. Through the end of 2023, you can get weekly copies of your credit report for free, though you likely don’t need to check that often.

On your credit report, you can find details for any collection account, including the original creditor and collection agency, if relevant, along with the payment status (paid or unpaid). Some creditors handle collections internally, while others hire collection agencies to go after delinquent accounts.

As a rule, all three credit bureaus will keep paid collection accounts on your credit report for up to seven years from the original delinquency date. The original delinquency date is the day you first missed a payment, and from which point you failed to bring the account current.

Once you’ve reviewed your credit reports, compare what you’ve found to your financial records. Some helpful questions to ask about collection accounts include:

You’ll need to substantiate your claims if you find inaccurate or erroneous collection accounts on your credit report.

Documentation that could be helpful includes:

To dispute old or inaccurate information with the credit bureaus, the account in question should meet one of the following conditions:

If you see old or inaccurate information, you should send a dispute letter to the creditor or collection agency reporting the information to the credit bureaus and attach any documentation that backs up your claim. You’ll also need to file a dispute with each credit bureau showing the inaccuracy, which may mean filing up to three separate disputes.

Filing disputes at each credit bureau’s website is generally easier. Still, you can also file disputes by phone or mail. You can use the free dispute letter template provided by the Consumer Financial Protection Bureau. You can upload or attach copies of your supporting documentation with each dispute.

After you file a dispute, there’s a reverse burden placed on the credit bureau to prove that the information on your report is accurate, says Rutger Van Faassen, a former lending executive who is now head of market strategy with Curinos, a firm that provides financial industry insights.

“Unfortunately, mistakes can happen with credit reports,” he says, whether it’s a misspelled name or transposed account numbers that land someone else’s collection account on your report.

In general, data furnishers must investigate and respond to a dispute within 30 days. The credit bureaus typically have 30 days to investigate a dispute, and must tell you the results of an investigation within five days of completing it. Your dispute could result in the account being updated or removed from your credit report.

If the data furnisher or credit bureau finds that the information is accurate but you disagree, you may need to regroup. Possible next steps include filing another dispute if you have more evidence or writing a statement to be displayed on your credit report indicating your disagreement.

Suppose you’re considering disputing a valid collection account in hopes the credit bureau will delete it. In that case, acts of deception are rarely a good idea, says Krisstin Petersmarck, a fiduciary investment advisor representative with Bridgeriver Advisors. “Generally, negative but accurate information cannot be removed from your credit report,” she says. “And if an organization claims they can remove information from your credit report that is current, accurate and negative, it’s likely a scam.”

That being said, you should still be aware of your options.

If your collection account is paid in full but hasn’t hit the seven-year mark, the creditor or collection agency may remove the account from your credit report if you request a goodwill deletion. While getting this outcome is a rare occurrence, it doesn’t hurt to ask.

In this case, you don’t need to contact the credit bureaus. Instead, you can send a goodwill letter directly to the creditor or collection agency with your request.

Since collections typically don’t fall off your credit report for up to seven years from the original delinquency date, you may need to wait things out. While this can be frustrating, it’s not all bad news. After two years, negative items including collection accounts start to have less of an effect on your credit. Plus, you can still work to improve your credit score.

If you have or had medical bills in collections, there’s more good news. As of July 2022, all three credit bureaus stopped reporting paid medical collection accounts on consumer credit reports. And starting in the first half of 2023, the credit bureaus will no longer include medical collection accounts under $500 on credit reports, whether paid or unpaid.

Whether you’ve requested a change or have finally hit the long-awaited seven-year mark, it pays to ensure your credit report updates.

If you’ve filed a successful dispute on a collection account, you will have the opportunity to review an updated version of your report.

If you’re waiting for an account to drop off your report, make note of the first date the account was reported as delinquent. Then, set a calendar reminder at the seven-year mark to confirm the account has fallen off. If it hasn’t, then you can file a dispute with the necessary credit bureaus to have the account removed.

Since credit scoring agencies include collections as part of your payment history when calculating your credit score, collections can negatively impact your score. However, how much impact paying off collections has on your credit score varies by the scoring model.

For example, FICO says more recent collections generally have a larger impact on your score. Yet paying off a collection account could raise, lower or have no impact on your score.

If your credit is in great shape minus the collection account, paying off the account is more likely to raise your score. Plus, accounts originally worth less than $100 don’t contribute to your FICO Score 8, 9 or 10. Accounts that you have paid in full won’t contribute to your FICO Score 9 or 10.

VantageScore 3.0 and 4.0 ignore paid collection accounts, and paying off collections could result in an increase in your score.

The bottom line? To raise your credit score, pay all of your bills on time and exercise other good credit habits. While you could receive a bump once you pay a collection account in full, increasing your credit score generally takes time.