Content of the material
- 1. Request a Goodwill Deletion If You Have Paid The Debt
- When do collections fall off your credit report in Canada?
- How Long Does Improving Your Credit Score Take?
- 3. Choose a Plan of Action
- 1. Dispute Inaccurate or Incomplete Collection Accounts
- 2. Ask for a Goodwill Deletion
- 3. Wait Until It Falls Off
- 7. Consider Consolidating Your Debts
- Frequently Asked Questions
- What is a collection on your credit reports?
- Can you remove a collection from your credit reports without paying?
- At a glance: How credit scores factor in collection accounts
- 6 Misconceptions About When Collections Will Fall Off
- How long do collections stay on your credit report?
- Medical debt collections
- Collections agency debt
- How Do Collection Reports Impact Your Credit Score?
- 4. Negotiate a Pay-for-Delete Agreement
- How to Negotiate a Pay-for-Delete Agreement
- Let’s Summarize
1. Request a Goodwill Deletion If You Have Paid The Debt
The first step, if you have paid the full collection account, settlement, or have been making regular on-time payments, is to mail the collection agency a “goodwill letter” that explains your situation.
Don’t go into too many details, but let the debt collector know if you’re trying to buy a house but can’t because of the negative information on your credit report.
Then kindly ask the debt collector to remove collections from your credit report out of goodwill.
With some newer scoring models of FICO and VantageScore, they ignore a collection marked as “paid”, though many lenders still utilize older formulas that will still weigh a paid collection account against you.
If this sounds overwhelming, you might want to reach out to a credit expert. It costs some money but is less expensive than you might think considering you are getting your own lawyer to fight on your behalf.
When do collections fall off your credit report in Canada?
In Canada, most negative pieces of information will fall off your credit report after six years. There are some situations in which negative marks could fall off your report sooner or later than six years, but you can expect most negative information to last six years.
How Long Does Improving Your Credit Score Take?
There is no set minimum, maximum, or average number of points by which your credit score improves every month, and there is no set number of points that each action will gain. How long it takes to improve your credit depends on the specifics for why your credit score is low. If the major negatives on your credit score are credit utilization, and then you pay off your balances, your score can improve drastically in a single month. If your credit is low because of multiple collections and poor payment history, then it will take several months of on-time payments to see any positive movement in your score.
3. Choose a Plan of Action
Here are three actions you can take to attempt to remove collection accounts listed on your report.
1. Dispute Inaccurate or Incomplete Collection Accounts
If you have inaccurate or incomplete collection accounts on your credit report, the Fair Credit Reporting Act gives you the power to dispute this information directly with the credit bureaus or creditor. You can send a dispute using the dispute form on each credit bureau’s website. The Federal Trade Commission has sample dispute letters on its website if you need help crafting one.
After you submit your dispute, a credit reporting company has 30 days to investigate your claim. If the credit bureau finds the provided information correct, the collection account will be removed from your report. However, if it finds that the company reporting the information was correct, the collection account will stay on your report for up to seven years.
2. Ask for a Goodwill Deletion
If you have a paid collection listed on your report, you can simply ask the debt collector or original collector to remove the collection. This usually involves sending the debt collector or collection agency a goodwill deletion letter explaining your mistake, asking for its forgiveness and showing them how your payment history has improved.
With this option, there’s no guarantee your collection will be removed from your credit report, but it’s worth a shot. If the account is removed, it may help you qualify for better terms on personal loans, mortgages and credit cards.
3. Wait Until It Falls Off
When the debt in question is legitimate and you can’t convince the debt collector to delete it from your report, your only remaining option is to wait. After seven years from the date the account first became delinquent, the collection should fall off of your credit report.
Although this means the collection will continue to impact your credit score; its impact will lessen as time passes.
7. Consider Consolidating Your Debts
If you have a number of outstanding debts, it could be to your advantage to take out a debt consolidation loan from a bank or credit union and pay off all of them. Then you’ll just have one payment to deal with, and, if you’re able to get a lower interest rate on the loan, you’ll be in a position to pay down your debt faster. That can improve your credit utilization ratio and, in turn, your credit score.
A similar tactic is to consolidate multiple credit card balances by paying them off with a balance transfer credit card. Such cards often have a promotional period when they charge 0% interest on your balance. But beware of balance transfer fees, which can cost you 3%–5% of the amount of your transfer.
Frequently Asked Questions
What is a collection on your credit reports?
A collection account is created when a debt you’ve failed to repay is transferred to a collection agency. You’re still on the hook for paying the debt once it’s sold, but you typically have to pay the collection agency instead of the original creditor.
Debts aren’t usually turned over to collections the moment you make a late payment, but the time between your first missed payment and the transfer can vary. It may take several months, it may happen immediately, or it may never happen at all, depending on the creditor.
Once the debt has been turned over to collections, it’s generally reported to the credit bureaus. It’ll then appear on your credit reports and, as a result, damage your credit scores until it’s removed.
Can you remove a collection from your credit reports without paying?
Technically, the answer is yes. It’s unlikely, though.
There are a few ways you could try. They’re essentially the same steps you’d take to request a paid account be removed:
- File a dispute with the credit bureau and/or ask the collection agency to validate the debt if you believe the collection account is inaccurate.
- If the account is legitimate but you’ve paid some of it and/or have exhibited responsible behavior otherwise, send the collection agency a goodwill letter requesting the unpaid collection be removed from your reports.
If the above routes fail, you’re probably out of luck. And remember that even if a collection account is removed from your credit reports, you’re still liable for the debt.
At a glance: How credit scores factor in collection accounts
|VantageScore 4.0||FICO Score 8||FICO Score 9|
|Ignores paid collection accounts|| |
Ignores medical collection accounts that are less than six months old
Weighs unpaid medical collection accounts less heavily than other types of collection accounts
Ignores small-dollar “nuisance” accounts that had an original balance of less than $100
Treats medical collection accounts, including those with a zero balance, like other collection accounts
Ignores paid collection accounts
Weighs unpaid medical collections less heavily than other types of collection accounts
6 Misconceptions About When Collections Will Fall Off
There are some common misconceptions about what affects the date a collection will fall off your credit report. Below is a list of other dates that do not affect the date a collections account rolls off your credit report.
- Activity on the collection: These include payments, a payment arrangement, or talking to the collector about the debt. This does not restart the reporting time limit for debt collections. It does, however, affect the statute of limitations, which is a different time limit defining the amount of time a collector can sue you for a debt.
- Previous late payments: Let’s say you were 30 or 60 days past due on the account in June 2019 but you caught up with payments and paid on time for a few months. You then went late again in December 2019, never got current, and the account was subsequently sent to a collection agency. Those first late payments in June do not affect the date the collection will fall off your credit report because you brought your account into good standing again. (Those late payments have a seven-year reporting limit too, but they will appear with the original account history, not the debt collection.) It’s the second set of late payments that starts the clock for the collection to fall off your credit report.
- Date the collection agency took over the account: Throughout the life of your debt collection, different agencies may collect on the account. These may appear on your credit report, but the delinquency date never changes, since it’s based on the original account. If a collection agency reports a different delinquency date, you can dispute the error and possibly even sue the collection agency for violating federal law.
- The date the account was opened: Unless it’s the case that you opened the account and never made a payment, or it’s a medical debt in which you were billed the same day you received services.
- The date the account was closed: Whether you close the account or it’s closed when sent to collections, this date does not impact the clock for your credit report.
- The date the account was settled: If it takes you two years after the original delinquency to pay off the debt, you still have only five years left before the debt collection leaves your credit report.
Remember that the collection reporting time limit is based on the original date of delinquency that led to your debt collection and no other dates or activity.
How long do collections stay on your credit report?
If a creditor’s information regarding an account’s delinquency is valid, the collections record will exist for seven years starting on the date it is filed.
Here’s how it typically works: When a creditor considers an account neglected, the account may be handed over to an internal collection department. Sometimes, however, the account’s debt is sold to an outside debt collection agency. This often happens when you are about six months behind on payments.
“Around 180 days after the original due date of the payment, the creditor might sell the debt to a collections agency,” says Sean Fox, co-president of Freedom Debt Relief. “This step indicates that the creditor has decided to give up on getting payment on its own. Selling to the collections agency is a way to minimize the creditor’s loss.”
At that point, you will start to hear from a debt collector, who now has the right to collect the payment. Depending on the type of debt you have, a variety of countermeasures exist on behalf of creditors to prevent major financial losses.
Unsecured debts, like credit card debt and personal loans, are generally sent to a collections agency, or can even be handled internally. If you fail to pay a secured debt, like an auto loan or a mortgage, foreclosure and repossession are the most common approaches for creditors to begin regaining losses.
If a creditor’s information about a collection is inaccurate, a dispute can be filed against the claim. This generally updates the collection information but doesn’t remove it. If the collection information is entirely inaccurate or false, filing a dispute may require extensive evidence and even an investigation to remove any disingenuous reporting.
Medical debt collections
For several years now, the major credit reporting agencies have treated medical debt owed directly to providers slightly differently than other types of debt. Some of the credit agencies will even ignore medical collection accounts that are less than six months old. This is because they do not necessarily view medical debt as an indicator of credit risk, according to Fox.
“In addition, this grace period gives consumers time to resolve disputes with medical providers or insurance companies, or develop a payment plan, before a bill is deemed overdue,” says Fox.
Even after the unpaid medical debt is added to your credit report, it may not factor as heavily into your overall credit score as other accounts in collection. However, be sure you fully understand what constitutes medical debt in the eyes of the credit agencies.
“Medical bills only become medical ‘debt’ if the unpaid money is owed to a provider such as a doctor, hospital or a lab,” says Fox. “If you paid for your medical expenses using a credit card, it is not viewed by the credit agencies as medical debt; it just becomes part of credit card debt.”
Collections agency debt
Paying off a debt that has already been sent to a collection agency will help improve your credit score. However, payment at this point will not remove collections action from your credit profile. Under certain conditions, the collections agency can remove the report from your credit profile. One of those conditions is known as a “pay for delete” letter.
“A ‘pay for delete’ letter is a negotiation tool where the collector or lender agrees to remove the account from credit reports in exchange for payment of the debt — typically more than the amount owed,” says debt relief attorney Lesley Tayne of Tayne Law Group. “This strategy is best suited for smaller lenders, as most major lenders are not open to this type of negotiation and is not something you should reasonably expect.”
A letter of goodwill to a creditor is another option that can sometimes manage to get the negative item removed from a credit profile. This can be successful if the unpaid debt is an isolated occurrence and you have a long-standing history with the lender, says Tayne.
How Do Collection Reports Impact Your Credit Score?
While a collection report usually causes serious damage to your credit score, how much it impacts it depends on which credit scoring model you use to calculate your score. It also depends on whether the collection account is paid or unpaid. For example, FICO Score 9—the latest version of the FICO credit scoring model—doesn’t report paid collection accounts.
Earlier versions of this credit scoring model, however, do include paid collection accounts. If a lender uses an earlier model to assess the likelihood you can repay a loan, it’s likely that it will see a lower credit score if you have a paid collection account listed on your credit reports.
4. Negotiate a Pay-for-Delete Agreement
When your original creditor can’t collect your past-due balance, it’ll sell your debt to a debt collection agency which means you now owe the money to the agency.
But when the agency buys your debt, it doesn’t pay the full amount. It may pay only a fraction of what you owed on your original debt.
If the collection agency can get you to pay off the debt, it makes a profit. As a result, you could leverage a payment in your negotiations.
How to Negotiate a Pay-for-Delete Agreement
You offer to pay part of your balance due in exchange for getting all negative information related to the debt off your credit report.
For this to work, you have to get this agreement in writing. An agreement over the phone won’t hold up. You could do your part and pay the agreed-upon amount only to learn the agent you spoke with didn’t make a record of the deal.
Now, if you owe $30,000 on an old credit card charge-off, you’d have a hard time coming up with a lump sum so large. Even 30 percent would still be $9,000. But this pay-for-delete strategy can help when you can afford to make a payment.
Late payments can be reported separately even though it’s associated with the same debt. Though, if you negotiate with your creditors to get a collection account removed, be sure all the negative data goes away.
Having good credit is one of the bedrocks of personal finance. Removing paid-off collection items from your credit report isn’t usually an option. But, you have nothing to lose by contacting your creditor before you pay off the account to set up a “pay for deletion” arrangement. Similarly, you have nothing to lose by contacting your creditor after you have paid the item in question off in full and ask them to remove it. If they are willing to make a goodwill deletion, then the matter will be settled. If they will not, then you’ll have to wait for the statute of limitations to expire so that the collections account “falls off” your credit report of its own accord. In the meantime, you can devote your energy to improving your credit score via alternative means.