If a debt you have ends up in collections, it can be devastating to your credit. These account entries on your credit report are referred to as collections accounts, and will stay there for seven years regardless of what you do to pay them off. If an injury or medical bills have stuck you with a collection account, you need to get rid of that account as soon as possible. So what do you do?
What Are Collections Items?
A collections item, or collections account, appears on your credit report when you have defaulted on a previous debt obligation and the company you owe money to has decided to put the debt in collections. But what does this mean?
A company will decide to put a debt into collections when it does not want the administrative hassle of trying to collect the debt themselves. They do this by hiring a collections agency, whose job is to contact the debtor and get them to pay the debt. They do this in a variety of ways, but the most common way is to simply harass the debtor with letters and phone calls threatening to take legal action against the debtor if the debt is not paid in full.
Collections agencies make money when they are able to recover the debt, and they make more money based on how much they’re able to recover. They will typically purchase debt and try to collect more than they’re paid for it.
However, collections agencies are known for shady practices such as trying to collect debt that is past the statute of limitations, or trying to collect debt that is illegitimately reported.
A collection agency will report delinquent debt to the credit bureaus in order to get debtors to pay, and for this reason, you may be able to get collections items removed from your credit report. But one question looms: should you pay it off in full?
Should I Pay Off A Collections Item?
In general, it’s a good idea to pay off any debt that you legitimately owe, even if the debt has gone to collections.
The way collections agencies work is that they will continue to send letters and phone calls until they are able to settle the debt with you. They are primarily concerned with collecting the money owed, and they will harass you as a last resort before they sue.
To avoid getting sued, and to avoid future harassment, it’s generally a good idea to pay off the collections debt.
However, paying off a collections item will not necessarily lead to a better credit score. Newer credit scoring models like the FICO 9 and the VantageScore 3.0 and 4.0 do not take collections into account if they have a zero balance. Older credit scoring models, however, do take old collections items into account until they disappear from your credit report.
Many lenders and credit bureaus still use older credit scoring models. In 2021 and beyond, though, credit scoring models used by lenders will be revised to the newer models. This makes it a good idea to pay off or settle collections items.
If you pay off a collections item, it will stay on your credit report for up to 7 years even if you pay it off. So how do you get a collections item off your credit report in 2021?
How To Remove Collections Items From Your Credit Report
Validate The Debt
If you are unaware of the item that has supposedly gone into collections, you may want to start by making sure the debt is valid. Sometimes, a clerical error will cause a paid off debt to end up in collections. In other cases, a collections item may be the result of identity fraud.
Related: How To Detect Identity Theft
To make sure the debt is valid, you can send the collection agency a debt validation letter. In the letter, make sure to include the following information:
- Your Legal Name (the name that the debt is under)
- Legal Address (at the time of the debt)
- Account Number
- Type of Account
- Name of the Original Creditor
Make sure you let them know that you know your rights under the Fair Credit Reporting Act, and that you require an answer within 30 days of receiving the letter.
- Credit Repair Specialists
- Debt Negotiation Companies
- Credit Restoration Companies
- Credit Repair Consultants
Propose A “Pay-For-Delete” Arrangement
Pay-for-delete is often looked down on, but it is a tactic that some credit repair companies use in order to remove black marks from their clients’ credit reports. You can do this, too, if you’re willing to negotiate with the collections agency.
They, in all likelihood, will require that you settle the debt right then and there. So make the pay-for-delete arrangement a part of the settlement. You may be able to arrange a payment plan if the debt is too much for you to handle right now.
Remember: collections agencies do NOT want to sue you to collect the debt. They make money by successfully collecting debt, and making it easy for them to get their money will give them a reason to work with you.
Get Help from Credit Repair Professionals
When you are looking for help with collections, it makes sense to work with a professional that has a lot of experience.
They can help you understand what to do to remove a collection from your report, and they can help you navigate the process.
Some of the professionals who offer this type of service include:
Related: DIY Guide to Credit Report Disputes
The Credit Pros Can Help You Remove Collections Items
The Credit Pros has been helping individuals navigate their credit woes for over a decade. Whether you need to improve your credit score, get your life back on track with debt relief, or if you need help disputing items on your credit report, The Credit Pros is here to help you.