You have a legal right to dispute debt reported by collection agencies and debt collectors. You can ask for validation or that it be removed from your credit report.
An individual’s credit history affects their ability to secure housing, credit, jobs, and to benefit from economic security. Once a collection agency account is noted on your credit report, your credit score may tumble. You have a legal right to dispute debt reported by collection agencies and debt collectors. You can ask for validation, or, if the debt is old, ask that it be removed from your credit report. If misinformation concerning collection accounts appears on your credit report, you have the ability to correct that information. Read on to learn how to remove collection accounts from your credit report.
What Are Collection Accounts?
It’s important to understand that there’s a difference between original creditor accounts and collection accounts. Creditors specialize in loaning money and collection agencies specialize in collecting money. Additionally, consumer protections under the Fair Debt Collection Practices Act (FDCPA) apply to debt collectors and collection agencies, not original creditors. When an original creditor account (such as a credit card, medical bill/patient account, etc.) remains unpaid for several billing cycles, it may be referred to a collection agency and become a collections account.
The company loaning your money when you first secure a line of credit or you begin incurring charges related to a service, through a bank, credit card issuer, or medical provider, is an original creditor. Once you miss a payment, unpaid collections for the account can be assigned to a collection agency. The collection agency will likely be paid a percentage of what they collect or they may be paid a flat amount to pursue your debt. Debt collectors buy delinquent accounts for pennies on the dollar and attempt to collect the debts they now own.
After a certain number of missed payments, the original creditors will consider your debt a “charge off” because your credit history gave them a reason to believe that they likely won’t be able to successfully collect the debt. Charge offs are often sold to collection agencies and debt buyers. However, an original creditor may opt to sue you instead of referring your debt to a collections agency or selling your overdue balance to a debt collector.
Why Try to Remove Collections Accounts from Your History, When Possible?
Charge offs and collections agency accounts are reported to the major credit bureaus. This type of debt can stay on your report for seven years. This negative information may negatively affect your credit score during this time. Medical collections are a little different. If an insurance company pays a medical collection account, it will be removed from the report. Health providers generally don’t report debt, but they will send the overdue medical bill to a medical collections company. Your credit score should not reflect a recent medical visit, but it will reflect a medical bill that’s been sent to a medical collections company.
Credit bureaus use formulas that lower a credit score once there’s an account charge-off or collection-related account reported. Financial advisors who keep tabs on credit scores report that payment history accounts for 35% of an individual’s credit score calculus. It’s no secret that credit scores drop significantly once an account in collections is reported. Removing collection agency accounts will improve your credit score and your ability to obtain credit at a favorable rate, housing, and even employment in the future. How do you know if a debt collection agency account is noted on your credit history?
Look at Your Credit Report
Credit repair starts with regularly reviewing your credit report. Thanks to the Fair Credit Reporting Act (FCRA) the three major credit bureaus (Experian, Transunion, Equifax) are required to provide free credit reporting on an annual basis. You can get a free copy of your credit report once a year if you request one. Equifax has started offering six copies per year starting in 2020 and running through 2026, but you must visit the Equifax website to get the additional copies.
You can request a free credit report from each of the national credit bureaus at annualcreditreport.com or you can call 1-877-322-8228 to get your free copy. The three major credit bureaus may report your credit information differently, so make sure to review each carefully for inconsistencies. Take a good look at your credit card accounts and medical collection accounts to compare the information noted on each report. If you find an account you don’t recognize, you can dispute the account.
Disputing the Collection Account
You have the right to dispute any information on your credit report with the credit bureau who has provided that report. Under the Fair Debt Collection Practices Act, debt collectors can face penalties for reporting false information, and credit bureaus are required to report truthful, accurate information. Despite these regulations, credit reports often contain errors for a variety of reasons, including miscommunication from creditors and identity theft. If you find that a collection agency account does not belong on your credit report, you can write a letter to each credit bureau or file disputes online. Experian, TransUnion, and Equifax each offer the option to file a dispute online, but if you choose to mail in your dispute, be sure to send the letter via certified mail and to attach a return receipt request. The credit bureau must investigate the disputed matter, and generally must respond within 30 days.
Check the Validity of the Collection Account
When you examine your credit report for inaccurate information, ask yourself whether each debt is yours and whether each debt amount has been correctly reported. A recent report from the Bureau of Justice Statistics states that 17.7 million people in the United States, 16 and older, are victims of identity theft annually.
The Federal Trade Commission (FTC) reports that imposter scams and identity theft are the two biggest categories of fraud. The first thing you should do when you’re contacted by a collector seeking your money is to check the validity of the account. But do it fast. The Fair Debt Collection Practices Act only gives you 30 days from the first contact to confirm the validity of the debt. A debt collector must stop collection activity for 30 days if they get a request to validate an account. Keep in mind that one original creditor account can pass through the hands of different collection agencies and debt buyers, so you could have an “initial contact” from different agencies for the same debt.
Debt collectors are required to tell you within five days of initial contact the amount you owe and the name of the original creditor. They must also provide statements which confirm that you have 30 days to contact the collector to dispute the debt and that if you request information about the original creditor, the collector must provide you with the information you need to do so. If you haven’t received these statements from the company trying to collect your debt, (check the small print), then the collector may have violated the Fair Debt Collection Practices Act.
If you want to request validation of new debt, send a letter to the collection agency with the account information and tell them that you dispute the validity of the debt. Ask them to provide information to verify the original account and the debt amount, and make sure to request contact information regarding the original creditor.
An account in your credit report may not be yours. You can dispute an account with the credit bureaus, and make a report to the Federal Trade Commission (FTC) and Consumer Financial Protection Bureau (CFPB) if you discover that you’re a victim of fraud.
Request Removal of Negative Reporting
Negative information about legitimate debts must generally be removed from your credit report after seven years, even if you did not pay the account in full. For charge offs, the credit bureaus are given seven years and an extra 180 days to remove the account.
Each state has its own statute of limitations that restricts the timeframe when a creditor can and can no longer sue you for debt. If you’ve owed the debt for a long time and you don’t have money to pay the debt, there’s a good chance you might be judgment proof, which means a creditor is unlikely to sue you because you don’t have nonexempt money or assets available to pay the debt. Knowing your rights can keep you from paying a debt that’s past the statute of limitations so you can focus on managing your current debt.
Negative information on your report that is over seven years old can affect your credit score. You can request removal of negative items over seven years old by filling out an online form on the website of the credit bureau or by mailing a certified mail return receipt requested letter to the credit bureau giving them the details of the debt and age of debt. If they do not remove the debt, then that inaction could be a violation of the Fair Debt Collection Practices Act.
Dispute the Debt
Perhaps the interest rates and late fees were calculated incorrectly, or late payments were not marked as paid. Perhaps there are two medical offices with the same name. There are many reasons to dispute a debt. Even if the debt for the collection agency account belongs to you, you can still dispute the validity of the information noted on your credit report using online dispute forms on the websites for Experian, Transunion, or Equifax. You can also write a short letter to the bureaus telling them that you dispute the debt.
When you dispute a debt, the credit bureau has 30 days to confirm that the debt is valid and accurate. If the debt is not fully accurate, it must be removed from your credit report. You also have the option to write a goodwill letter and request a goodwill deletion. Simply write the company a polite fact-based letter explaining the situation and ask for a goodwill deletion.
If you want to start successfully managing your debt and credit score, repairing collection account errors on your credit report is a great way to start. You can dispute inaccurate accounts. If the account is inaccurate, it must be removed from your credit report. Once the negative information is removed, your credit score may improve.
If you have several accounts from debt collectors and collection agencies on your credit report, consider talking to a bankruptcy attorney who offers a free consultation to see if bankruptcy is a viable debt relief solution for you. If an attorney is out of your budget range, you can use Upsolve’s free bankruptcy website app to navigate the bankruptcy process so you can stop collection activity and seek a financial fresh start.