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3 Ways to Repair Your Credit with Debt Collections

George Simons | December 02, 2022

Summary: Is your credit report haunted by debt collections? You can fix it! Here are 3 ways to repair your credit with debt collections.

Sometimes life does not quite play out the way we hope it should. Take the case of the outbreak of the Corona pandemic in 2020. It led to the loss of income sources due to job loss or shutting down of businesses.

You may have been one of the unfortunate ones to find yourself in a financial crisis. And, for some time now, it has been impossible to keep up with bills. Notices from creditors are piling up, and debt collectors are knocking at your doors.

When you look at your credit score, it is less than perfect. You know you need urgent help in repairing your credit. We will show you how below.

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How debt collections impact your credit

We spoke to a top-rated credit repair company to understand how debt collections impact your credit. A creditor can assign any unpaid debts to a collections agency. It happens when the lender is unable to get the money on their own for whatever reason.

The collection agency takes on the responsibility of collecting the money on their behalf. They can go about it in two ways. The first is to follow-up debtors, get the money and hand it over to the creditor. The second is to buy off the debt from the creditor.

The reporting bureaus will create a separate account for the collection account in your credit report. Do note, paying the debt does not mean automatic removal of the collection account. What you should do is remove debt collections from your credit report. Such stay on for up to seven years and will lower your credit scores.

How to remove collection accounts and repair your credit

1. Ask for verification of the debt collection account

Once you receive notification that you have a collection, seek verification from the credit bureaus. Write a letter asking for the same. By law, the creditor is supposed to give accurate information. The bureaus will give them a 30-day window to respond to the information you need.

If the bureaus get no response, they have no choice but to remove any items you may be disputing. The process requires patience and time. Debt collectors can take a long time to respond to validation requests.

In some cases, the collection agencies may not respond at all. In this case, you can seek Estoppel by silence. It is a way of preventing collection agencies from asserting claims or defense because they did not share relevant information with you. It is a valuable step to take if the issue ever ends up in a court of law.

Also note, the collection agencies may respond. But, the answer may not be satisfactory. In that case, ask for a reinvestigation. The other option is to demand more information on the verification methods. A third route is to file complaints with relevant authorities including FTC, CFPB or seek legal redress.

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2. Hire a credit repair agency

The credit bureaus will send you a notification that you have a collection account. But, you should also keep a close eye on your credit report. Even then, it can be challenging to understand some of the items.

While you may not be disputing the collection, there could be errors or inaccuracies. The reporting agency may have payment dates wrong. In some cases, the collection account information may not even be yours.

After the lapse of 7 years, the paid collections come off your report. But, the reporting agencies may fail to remove them, as they should. Credit repair agencies have the expertise in identifying such errors. They can then file a dispute with the credit bureaus to fix the mistakes.

The process can be tedious and time-consuming. There is a lot of back and forth, which can be quite frustrating. Letting someone else handle the process for you will save you a lot of headaches.

3. Work on a debt payment plan

If you are not disputing the debt collection account, start working on a payment plan. Try to negotiate favorable terms. It should be an amount that you can meet without the danger of being late or skipping them altogether.

Credit repair professionals can advise on some workable solutions for you. The first is pay for delete. In this case, you settle the full amount. In return, the debt collectors promise to remove the collection account from your report.

The reality is that it may not be that simple. You could get into trouble with the reporting agencies if the collection agency tries to remove accurate information from the report. It is also worth noting that some of the latest scoring models are placing less emphasis on paid collections. Even if they exist on your credit report they will not have a significant impact on your overall score.

The second option is to negotiate a settlement. Depending on the agreement, it could be a fraction of the full payment of the amount. But do note. If you have a collection account that is approaching 7 years, it means it will be off your report soon.

If you make a settlement with the debt collectors, it resets the account. Now, it will reflect as a paid collection and stay on the report for the next 7 years. In essence, you will have done more damage than good.

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Final thoughts

An inability to pay debts can land you in the crosshairs of debt collectors. And, that's not all, it gets worse. The collection agencies will report you to the credit reference bureaus. The latter will add the debt collections to your credit report. Such will impact your scores, with dire consequences. You can find it very difficult to get financing jobs or even an apartment with a low score.

Keep a close eye on your credit report by asking for a copy from the reference bureaus. If you notice any inaccuracies or errors, credit repair professionals can help rectify them. Such include wrong information on your debt collection accounts.

Credit repair experts work with the agencies to correct such information on your behalf. Top-rated credit repair professionals can also help with seeking verification of specific information. And, they can advise on how to improve your credit scores.

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