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3 Effective & Easy Ways To Remove A Collection Account From Your Credit Report

Having a debt in collection impacts your credit score negatively. However, the good news here is that the severity of the impact reduces over time. Check out the steps you can take to remove a collection account from your credit report and get your credit score on track.

What does it mean when a debt is termed as a collection account?

Having a debt in collection means that the original lender (mostly your bank/NBFC) has turned over debt collection responsibility to a third-party agency.

Generally, unsecured loans like personal loans, credit card debts, and secured loans like two-wheeler and car loans are passed on to debt collection agencies. This is because the lender cannot foreclose/possess a property to retrieve the costs of the loan. When it comes to vehicle loans, though the lender can possess the vehicle, they are likely to receive less than the loan amount when they sell it. Hence, they pass on the loan account to a debt collection agency.

Most lenders try to collect the pending EMIs by themselves before passing it to a collection agency. When the lender is unable to come to a deal with the borrower, the loan is written off and passed to a third-party collection agency. Typically, most loan accounts are sent to collections only after the EMIs are late for more than 120 – 180 days.

How does a collection account impact your credit score?

The general rule of thumb is that – the longer you delay your loan repayments, the higher is the impact on the credit score. For example, the effect of a 120-days-late EMI is undoubtedly more than the impact of a 30-days-late EMI.

When it comes to debt in collections, it means the EMI has been delayed for months. It causes a black mark on your credit report and impacts your credit scores severely. This is why it’s highly recommended that you enter into a negotiation with the lender and try to settle the loan before it passes to a debt collection agency. It’s easier for your credit score to recover from late payments than recovering from a collections account.

Suppose you have only one loan account in debt collection. In that case, it’s easier to recover from it than having multiple collection accounts. The silver lining here is that – the impact of a collection account on your credit score diminishes over time. Generally, a collection account will remain on your credit report for seven years from the date it was added.

Also, the impact of a collection account fades over time. A collection account that was recently added to your credit report will hold more weight than an account that was added years ago. After seven years, the collection report will fall off your credit report and will no longer impact your credit score.

However, if you’re looking to boost your credit score in the interim and want to remove the collection report, it’s possible. Here in this guide, we discuss three simple ways to eliminate a collection account from your credit report.

Option 1: Request a Goodwill Deletion

Start by sending an email to the collection agency explaining your situation. Let them know that you’re now back on track and making on-time payments despite the initial loan default. Explain that you are looking to improve your credit score, and it would be great if they can remove the collection account from your credit report out of goodwill.

This may seem too good to be true, but the collection agency may remove the account from your credit report, especially if you have made timely payments. The worst they could do is let you know that it’s not possible. So, it’s worth giving it a shot.

Option 2: Look for Inaccuracies

If the last option didn’t work, it’s time to move on to the next method. For this method, you need the latest copy of your credit report. You can get a detailed credit report by visiting CreditMantri. Just provide a few key details, and your report will be mailed to you within a few minutes.

Once you have the report – print it out and scrutinise it carefully. Check the details regarding the collection account. Confirm all details and see if there is anything inaccurate on it. If you notice any incorrect information make sure to report to the concerned credit bureau.

Credit bureaus are required by law to include only accurate information on your credit report. If there is any inaccurate information, they have to rectify it. If that isn’t possible, the bureau should remove the corresponding item from your report.

Check the following details on the collection account to see if there are any inaccuracies:

  • Account number
  • Balance
  • Date opened/date closed
  • Account status
  • Payment status
  • Credit limit
  • Delinquency date

If you notice any inaccuracies, send a dispute letter to the bureau, telling them what is wrong. Tell them the specific information that is inaccurate, and ask them to remove the corresponding entry from your report. Hopefully, the credit agency will release the collection account from your report.

Option 3: Negotiate Pay for Delete

This option will most likely work. When your lender passes off your loan to a debt collection agency, you technically owe the remaining to the agency. When the agency purchases responsibility for your debt from the lender, they don’t pay the full outstanding. Instead, they only pay a fraction of the unpaid balance.

Use this as your leverage. Here’s what you should do: negotiate with the debt collection agency to see if you can pay a part of the outstanding as a single settlement. In return, the agency has to remove the collection account from your credit report.

This is one of the best ways to remove a collection account from your credit report, as most debt collection agencies look to recover at least a part of the debt, if not anything.

Work with the debt collection agency to draw up a settlement contract. Once they remove the collection account from your report, pay the agreed balance. 

Seek the Help of a Professional

If nothing works, you can always seek the help of professional credit repair services like CreditMantri. CreditMantri can help you restore your credit score and your credit ratings on track for nominal fees. They have the tools and expertise to help you out. If you don’t want to handle dealing with debt collection agencies on your own, you can always avail the services of a trusted credit repair agency like CreditMantri and get your credit reports sorted.