Bills get overlooked, addresses change, and amounts get mistyped. The result is the same: something was not paid for on time and it was sent to collections. For the lucky ones, it hasn’t been reported to the credit bureaus.
For those who are not so fortunate, there will now be a collections account listed on their credit report. Sometimes, the collections account is an error and should be removed. Individuals looking for a quick credit fix should reach out to a reputable credit repair company to help get these items removed, as the damage can be serious.
Good Credit Gone Bad
Any person who has a current credit card, mortgage, or auto loan has active accounts reporting to the credit bureaus every month. Using current and accounts closed within the last seven years, the three credit bureaus calculate a credit score, which can range from 300 to 850. Most lenders would like to see a credit score in the mid-to-high 600s in order to approve a loan.
A collections account can easily drop a person’s score by fifty points or more; the same holds true for a single missed payment that has gone more than thirty days past due. Years of hard work making timely payments can be erased in an instant. Therefore, getting these accounts resolved or removed is critical.
Mending Mistakes
Removing accounts from a credit report isn’t as straightforward as it sounds. However, there are a few options for rectifying collections accounts.
Pay the Collection
For legitimate debts, especially those that are recent, paying the full amount due is usually the best course of action. It should be understood this does not remove the collections account, but it will now be listed as ‘paid in full and closed.’ This will help boost a credit score significantly. In some cases, collections offer Pay for Delete options, by which they remove a collection entirely.
Another option is to ask for a settlement. Collection agencies often buy debts from other companies for pennies on the dollar. This means if they collect even a fraction of the amount due, they turn a profit.
Combined with a collector’s desire to receive a commission, a person can get serious discounts on the amount due. Once again, however, this does not remove the item from the credit report. It will be listed as ‘paid by settlement,’ which is a step down from ‘paid in full.’
Debts Past the Statute of Limitations
Every state has different limitations, which is usually three to five years. This is the period in which a collector may file a lawsuit against the debtor. If a debt is past the statute of limitations and past the seven year mark for being listed on a credit report, a removal can be requested.
This involves calling the credit reporting bureaus and asking that the items be removed. A simple phone call is not enough, however, as the bureau will likely ask for evidence that the debt is expired.
What If the Debt Isn’t Mine?
If you’ve noticed a collections account or other line item on your report that doesn’t belong to you, reaching out to professionals may be the best option. Thankfully, licensed credit repair companies like The Phenix Group have credit professionals that can work to get such items removed quickly.
We’ll work with creditors, collectors, and the credit reporting bureaus to set the record straight. Once your score is back on track, you’ll be able to apply for better loans at better interest rates, saving you money and helping you reach the financial freedom you want!