The Negative Impacts of Credit Collection Accounts
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A collection account has a negative impact on your credit score. A collection account will stay on your report for seven years if you don’t do something to remove it. The impact on your score will lessen with time but it is a blemish for prospective employers and creditors. There are ways to deal with this problem.
If it is not yours dispute it
If the debt is not yours it legally can not be listed on your credit report. A collector is not allowed to place an item on your report that is not accurate. The credit bureau must remove an invalid “trade line’. You can dispute it online or you can send a letter to the credit bureau telling them it is not your debt. This letter is most effective when kept short and to the point. Don’t surmise how you think it may have gotten on your report. The issue is it isn’t yours and the law requires that your report be accurate and timely.
If collection account is yours
There are steps that a collector must take if they are to place an account on your credit report. If you ask for a debt validation within 30 days of the notice then the creditor must validate this debt to you or they must remove it from your credit report. If the creditor does not respond then the bureau is to remove it. Send any dispute or request for validation by certified mail return receipt. You can save a little money on this process by having it sent to you electronically.
Sold debt
If your debt has been sold, usually done about every six months, and it is listed twice or still listed by the company that no longer owns that debt dispute it. The credit bureau is to verify that the debt is valid and if the company no longer owns it and you have disputed it, it will usually drop off.
Older than seven years
If the date of first delinquency is over seven years it is to be removed from your credit report. If the seven year time period for reporting a collection account is up, dispute it. If you have any records of the date the debt became delinquent sending proof of that will help your dispute. There are many debt collectors that will try to collect on debts that are no longer owed. One of the ways that they do that is to re-age the debt. Being aware of this illegal practice can save you headaches and a bad credit score.
Paying a collection account
Paying a collection account will minimally improve your score. It will show other credit grantors that you have paid off the debt. Being aware of a few things when you pay off a debt can also save you from a prolonged negative impact. One is to get a letter stating that if you pay the account for an agreed amount it will be removed. This is the best solution. If you make the arrangements by phone, do not make any payment until you receive the agreement in writing. A statement that it was paid as agreed is not enough. If they won’t take it off your account you will still want to pay it but make sure that you receive in writing what the terms are and that the debt will not be re-listed with the pay off date as the last date of activity. If your debt is 5 years old and you don’t do this, the seven-year clock will start again and instead of having 3 more years you will have 7 and since the date is recent it will have an even more negative impact on your credit.
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