If you've paid the balance of a delinquent account that has been turned over to collections, you've done the right thing by making good on the debt. But if you look at your credit report, it may seem as though no good deed goes unpunished. Debts that are sent to a collections agency show up on your credit report as negative records, and there they will stay there for seven long years, regardless of whether you've paid the debt or not, say Credit.com financial advisers. Making sure that this negative record doesn't remain on your credit report for longer than it should first requires you to keep a meticulous account of the date a record of collections was first reported to consumer reporting agencies.
Step 1
Obtain your credit reports seven years after a collection record appeared. There are three nationwide consumer reporting agencies that maintain your credit history: Equifax, Experian and TransUnion. You can get all three credit reports free of charge once a year from the government-authorized website maintained by these agencies, AnnualCreditReport.com, or by calling 1-877-322-8228, says the Federal Trade Commission.
Step 2
Contact the consumer reporting agency if you notice that a paid collection record is still reflected on your report. Lucy Lazarony, Credit.com financial adviser, stresses doing so in writing if possible. Experian requires you to first file a dispute online; however, Equifax and TransUnion accept written disputes. In your letter, make sure that you include your name and contact information, identify the record in your report and note when it should have expired. Use certified mail and request a return receipt when sending written disputes.
Equifax
P.O. Box 740256
Atlanta, GA 30374-0241
TransUnion
2 Baldwin Place
P.O. Box 2000
Chester, PA 19022
Step 3
Wait for a response. Consumer reporting agencies have 30 days to investigate your dispute and send you a written response. By law, the agency must also inform the collections company of your dispute as well. If a record of a paid collection is removed from your credit report, you'll also receive a revised copy that won't be included as part of your free annual credit report.
Step 4
Don't give up on obtaining credit in the future. As the Federal Trade Commission points out, poor credit history doesn't mean no credit. Each of your prospective lenders employs specific standards and may cut you some slack for paying a debt that was sent to collections. "Some may look only at recent years to evaluate you for credit, and they may give you credit if your bill-paying history has improved," says the FTC.
Tips and Warnings
- Credit.com advises that you strike a deal with a collector as soon as you receive notice, so you can salvage your credit. But if your financial situation is tight and you have more pressing debts that are not in collections, pay those first.
- Credit-repair operations don't have any special pull with consumer reporting agencies, so don't buy into a scam. "The truth is, these companies can't deliver an improved credit report for you using the tactics they promote. It's illegal. No one can remove accurate negative information from your credit report," says the FTC.
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