Remove Collections – Once and for All
When you start working on repairing your credit, paying off old debts is part of the deal. But, how you deal with these old collections accounts can have a big effect on your credit score. By approaching your creditors in the right way and securing certain agreements from them, you can get old collections off your credit report sooner and keep them from dragging down your score.
What Stays on Your ReportWhen you pay an old debt, it doesn’t automatically disappear from your credit report. In fact, a debt can stay on for seven years after you have paid it off, since this was the last time that you had any interaction with this record. While the collection stays on your report, it will show up as “paid” or “settled.” If you just pay the old debt without making any other arrangements, it will stop showing up eventually. But, in the meantime, it could mean the difference between getting a mortgage and being passed over. Or, you could wind up paying a higher interest rate, which will cost you thousands more over the life of your home loan.
How to remove collections Off Your ReportWhen you start addressing negative entries on your credit report, it makes sense to contact the creditor to negotiate instead of just writing a check. When you are making arrangements to pay, ask for what is known as “pay for delete.” In a pay for delete agreement, you pay the debt and they remove it entirely from your credit report. Experts say that about 10% of collection agencies are willing to agree to pay for delete. In general, you will have better luck with a smaller company than with a larger one. A few of the situations where your pay for delete request is most likely to be honored:
- It’s a medical debt. Medical debts are often now treated differently than other types of unpaid debt. In fact, in the newest FICO scoring models, unpaid medical debts are not counted at all. While the new FICO scores are not yet widely used, they make it more likely that a collection agency will agree to a pay to delete.
- The original debt is not credit card debt. When a collection on your credit report is related to a big bank, chances are low that you will be granted a pay to delete. Your best bets are debts that are owned to smaller companies.
- You never got notice of the original debt. If a collection letter is your first notification that you have an unpaid debt, collection agencies are more willing to work with you. Life happens, and sometimes we get surprises when errors are made in a creditor’s system or if you move right when you get a bill.