A host of credit repair services and clinics assure you they can clear a bad debt collection from your credit report. However, if you're in the know about how negative, accurate information affects your credit reports, you probably also know that if you didn't pay your debt, attempting to remove it may prove to be a fruitless endeavor. It is possible to clear a bad debt from your credit but only if the record has been entered or reported erroneously or if it has expired.
Step 1
Examine your credit report and note if a record of a bad debt is erroneous. If your personal information, such as your name and Social Security number, was compromised, identity thieves could have used it to acquire a credit card or loan that subsequently went into default. Or perhaps you paid the debt in full in a timely manner, but your payment was never applied to your account, suggesting error by the lender. These are two examples of how errors may be reflected in your credit report, and you should dispute them.
Step 2
If the bad debt is an accurate reflection of your credit history, determine if the record is expired. If it was sent to collections by a lender or creditor, the record should be expunged from your credit report after seven years, according to Credit.com. If an old record continues to remain on your credit past the time that it should, it is no longer timely, and you should dispute it.
Step 3
To exercise your full rights under law, contact the credit bureau and the lender who filed the record, advises the Federal Citizen Information Center (FCIC). Although Experian, Equifax and TransUnion have websites where you can file a dispute online, the FCIC advises you to submit your appeal in writing and send a copy of the appeal to the creditor who turned your account over to collections. To view a sample dispute letter and the current mailing addresses for the three major credit bureaus, see the Resources section.
Step 4
Help the credit bureau expedite its investigation of your appeal by including a copy of your credit report with the bad debt collection highlighted. Also, include copies of any relevant supporting documentation that serves as proof that the record is inaccurate or not timely. The Federal Trade Commission (FTC) advises making complete copies of your correspondence and sending it to the credit bureau by certified mail, return receipt requested, to ensure that it is received.
Step 5
Give the credit bureau time to investigate your dispute. The FCIC indicates that this usually takes around 30 days. The credit bureau is required to send you its results in writing, as well as a revised copy of your credit report if the bad debt collection record is removed. Once the record is removed, the credit bureau is prohibited from re-entering it in your credit file unless the lender or creditor that supplied the information verifies it for accuracy and the credit bureau gives you a written notification containing the creditor's or lender's name and contact information.
Step 6
Stay away from credit repair clinics that guarantee they'll clean up your credit. Credit.com and the FTC indicate that these are usually sham organizations. For a hefty fee, they may dispute records of bad debt collection that are both accurate and timely---the same way you're entitled to do by law. The result is that your credit report doesn't change. As Credit.com points out, credit bureaus don't have to remove accurate information unless the record is more than seven years old.
Tips and Warnings
- If negative information shows up on your credit report due to identity theft, the Identity Theft Resource Center advises putting a fraud alert on your credit reports. If you submit a police report, this alert will remain in place for seven years. A bad debt is also called a "chargeoff," notes Credit.com. After the lender writes off the debt, it may be sold to a collections agency.
- If a bad debt occurs due to identity theft, you may have a lot more on your hands than just a flawed credit report. For more information on identity theft, see the Resources section.
Things You'll Need
- Copies of your credit reports from Experian, Equifax or TransUnion (as applicable)
- Copies of supporting documentation
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