How Do I Get a Paid Collection Off My Credit Report?

How Do I Get a Paid Collection Off My Credit Report?

How Long Does a Collection Account Stay on a Credit Report?

The Fair Credit Reporting Act lays out that the collection has to stay on your credit report for up to seven years from the date of default on the original account. This is to give lenders a clear picture of your financial behavior so they know the risks of lending you money.

However, on a credit report, a paid collection can still stay on your credit report for up to seven years, regardless of whether the account has a $0 balance.

After seven years, the paid collection will automatically drop off your credit report.

How Long Does A Collection Account Stay on Your Credit Reports?

The fact is that a collection account will not be removed from your credit report just because the account has been settled or paid.

Even after a collection account has been paid, the credit bureaus are still legally allowed to continue to report the collection for up to 7 years from the date of default on the original account, thanks to the Fair Credit Reporting Act.

To put it another way, a collection account can remain on your credit reports for up to seven years from the date the original debt became 180 days past due, regardless of whether the account has a $0 balance.

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Does Paying Off Collections Improve My Credit Score?

Historically, paying off your collections does not improve your credit score because a collection stays on your report for seven years. Newer ways of calculating credit scores no longer count collections against you once they have a zero balance, but it is not possible for you to predict which method your lender will use to calculate your score.

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.

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.

What You Need to Know About Debt Collections

Debt collections come in many forms. Whether it’s an unpaid medical bill, a cell phone bill, or even an $18 library book you never returned, unpaid debt can lead to negative information on your credit report.

It looks especially bad when the negative item comes from a collection agency. Collections accounts tell other creditors you let an old debt go three or maybe even six months without paying.

When you apply for new credit, lenders know your old lenders lost money on your accounts. So a collection account will have a negative impact on your ability to apply for new credit — whether it’s a mortgage, a major credit card, or a personal loan.

3. Ask the Collection Agency to Validate the Debt

If you can’t find inaccuracies on your credit reports, write to the collection agency and ask it to validate your debt.

Under section 809 of The Fair Debt Collection Practices Act, collection agencies are required to validate debts they are attempting to collect, if you request that they do so.

The main issue here is that you have only 30 days to make the request after the collection agency first contacts you.

If they are unable to validate the debt, you can ask them to remove it from your credit report.

If There Is Inaccurate Information on Your Credit Report

If you are hoping to delete a paid-off collections account from your credit history so that you can immediately boost your credit score, there are other ways to go about achieving that aim. While raising your score to any significant degree takes time, patience, avoiding late payments, and a dedication to good debt management habits, working with a credit repair organization can help you boost your score quickly. This is a good approach to consider if you’re trying to raise your score by a small amount to secure better terms for a major upcoming purchase and there is inaccurate information reported on your credit history.  

Hire a Credit Repair Organization

Although credit repair organizations ultimately can’t do anything that you can’t do yourself for free, working with them can be helpful if you are uninterested in making credit dispute efforts on your own. Beware of any type of credit service company that guarantees you that they can raise your credit by at least a certain amount or make negative information that is accurate disappear. It is illegal to remove legitimate negative information from your credit report, regardless of who actually does it. These firms are ultimately governed by the Credit Repair Organization Act (CROA). This means that any credit repair firm that promises to help you must adhere to the following requirements:

  • They must advise you of your rights in a written contract that clearly outlines the details of the services that they will perform

  • They must give you a 3-day right of rescission that you will have in writing, where you can cancel within the first 3 days without any fees being assessed

  • They must tell you in writing how long their services will take

  • They must tell you upfront exactly what they will charge for their services

  • They must disclose any guarantees that they make in writing before you sign any contract

If the credit repair company that you hire does not furnish you with this information before beginning to work on your credit, then you have several recourses of action that you can take. The first step is to file complaints with the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB). The FTC has the enforcement power in this case, so file your complaint with them first. Then you’ll need to file a complaint with your state’s attorney general (AG). If all else fails, you can sue your credit repair company in federal court. 

3. Aim for 30% Credit Utilization or Less

Credit utilization refers to the portion of your credit limit that you’re using at any given time. After payment history, it’s the second most important factor in FICO credit score calculations.

The simplest way to keep your credit utilization in check is to pay your credit card balances in full each month. If you can’t always do that, then a good rule of thumb is to keep your total outstanding balance at 30% or less of your total credit limit. From there, you can work on whittling that down to 10% or less, which is considered ideal for improving your credit score.

Use your credit card’s high balance alert feature so you can stop adding new charges if your credit utilization ratio is getting too high.

Another way to improve your credit utilization ratio: Ask for a credit limit increase. Raising your credit limit can help your credit utilization, as long as your balance doesn’t increase in tandem.

Most credit card companies allow you to request a credit limit increase online; you’ll just need to update your annual household income. It’s possible to be approved for a higher limit in less than a minute. You can also request a credit limit increase over the phone.

At a glance: How credit scores factor in collection accounts

VantageScore

3.0

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

What if the Information Listed on Your Credit Report Is Wrong?

It is important to immediately dispute any debt that is not being reported accurately on your credit report(s). Each credit bureau receives information from creditors, although not all creditors report to each bureau. It’s important to pull a free credit report from each of the credit bureaus on an annual basis for review, if not more frequently than that. 

If an item shows up on your report as not being paid or the amount of the debt reported is larger than the actual debt (or any other kind of inaccurate information is listed on your credit history), don’t hesitate to write a dispute letter to all three of the major credit reporting agencies (Experian, Transunion, and Equifax) as well as VantageScore and dispute the inaccurate information. The Fair Credit Reporting Act (FCRA) legally requires these companies to remove any item in question until it has been either verified or corrected. Make sure you only contest inaccurate information, though; trying to dispute accurate information will only hurt you in the long run. 

Do I still have to pay a debt that fell off my credit report?

Your debt isn’t simply erased once it falls off your credit reports, but your liability for owing it might vary if the debt is past its statute of limitations.

If you never paid off the debt and the creditor is within the statute of limitations, you’re still liable for it and creditors may try to collect the money. The creditor can call and send letters, sue you or get a court order to garnish your wages.

If you never paid off the debt, but it’s past its statute of limitations, the debt is now considered “time-barred”. How you choose to act on a time-barred debt that’s fallen off of your credit report is your choice. According to the FTC, you can do one of the following:

  • Pay nothing
  • Pay part of the debt
  • Pay the total outstanding debt

Regardless of which option you’re considering, talk to an attorney about your best path forward before contacting a debt collector.

Depending on the state you live in, debt collectors might be allowed to call you to try to collect on a time-barred debt. However, creditors and debt collectors can’t sue you or threaten a lawsuit to collect on a debt that’s outside of the statute of limitations.

If you’re looking to put your debt behind you and move on with a clean slate, a surefire way is to pay what you owe, or at least an agreed-upon part of what you owe. Before making the phone call, make sure you know:

  • That the debt is legally yours
  • The date of the last payment on the account
  • How much you owe the creditor
  • What you can realistically afford to pay per month or in a lump sum

If you negotiate a payment for less than the full amount owed, get the payment agreement in writing from the collector before you send in any payment.

What happens to your credit score when derogatory marks fall off your report?

Most negative items should automatically fall off your credit reports seven years from the date of your first missed payment, at which point your credit scores may start rising. But if you are otherwise using credit responsibly, your score may rebound to its starting point within three months to six years.

If a negative item on your credit report is older than seven years, you can dispute the information with the credit bureau and ask to have it deleted from your credit report.

2. Determine the Account’s Legitimacy

While reviewing the collection listed on your account, make sure the debt belongs to you. If it doesn’t belong to you or you made on-time payments to pay it off, dispute the error to remove the collection from your report.

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.

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.

How Do Collections Affect Credit?

Creditors view collection accounts as red flags, but likely view paid collections with less disfavor than unpaid ones. The most recent version of the FICO® Score (FICO 9) and versions 3.0 and 4.0 of the VantageScore® credit scoring systems agree: Unpaid collections can hurt your credit score, but paid ones do not.

Some lenders use older versions of both credit scoring systems that still count paid collection accounts, however, and there’s no way to know ahead of time which credit scoring method(s) a lender will use when deciding to approve a loan application. So while paid collections on your credit report may still hurt your chances of approval, paying off the account gives an opportunity to do the least possible damage.

Collection agencies don’t always play by the rules

Collection agencies can sometimes be pushy, and some may even violate the Fair Debt Collection Practices Act, which prohibits debt collectors from using abusive or deceptive practices in an attempt to collect from you.

If you suspect you’re being harassed or treated unfairly, it’s important to know your legal rights. We recommend consulting with a legal professional as a matter of course, but you can start by checking out our guide to your debt collection rights.

Can you dispute a collection with the credit bureaus?

You can absolutely dispute a collection if you think it’s erroneous. Formal disputes must be filed individually with each credit bureau and can usually be done online through each credit bureau’s website. You should also dispute the information with the company that provided the information.

Credit Karma’s Direct Dispute™ feature can help you dispute errors on your TransUnion® credit report. We can also help you file a dispute with Equifax directly if you see an error on your Equifax® credit report.

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