Finding an account classified as collection on your credit report can feel intimidating. Having a collection account not only impacts your credit score but leaves behind a negative mark on your credit report. If you’re looking for ways to remove the impact of the collection account from your credit report and score, then you’ve come to the right place.
Find out more about collection accounts and how long they can stay on your credit report. Also find bonus tips on how to remove collections from your credit report.
What is a collection account?
When you fail to make loan payments or credit card bills on time, the lender classifies it as a collection account after a specific period. Generally, a loan account is classified as a collection account if the borrower defaults for more than 90 days on the payment.
Typically, lenders inform the borrower before classifying an account as a collection. The lender provides the borrower with a grace period to get back on track. Frequent reminders are sent to the borrower asking him/her to pay the dues along with the late fees. If there is no response from the borrower and the borrower fails to make any payments after these frequent reminders, the loan account is classified as a collection account.
Collections accounts can remain on your credit report for up to seven years from the first date it has been delinquent with the creditor. The same is applied for all late payments. But not all late payments are equal.
A late payment that is 30-60 days late won’t have that much effect on credit scores as much as a late payment that is 90 days late. However if you are late on payments, it’s always a good idea to catch up on payments so that you can avoid collections.
Is it easy to get paid collections removed from the credit report?
It is possible to get paid collections removed from your credit report. But as per the RBI, items are to be reported for seven years from the date you first fell behind with the original creditor.
That seven year timeframe probably feels like forever. The idea that you can get the collection account removed from your credit report may feel appealing, but it's more difficult than you may think. This is why, we highly recommend borrowers to make payments on time and avoid a loan account lapsing and moving to collections.
Can I have an unpaid collection removed from my credit report?
It is possible to remove unpaid collection from a credit report. There are three ways you can achieve this.
1.Write a dispute letter to challenge the collection
If you find any error which you can prove is wrong then you can raise a dispute with all the required documents supporting your claim and challenge the collection. The best way to dispute a collection on your credit report is with help from an experienced credit repair company like CreditMantri.
2.Write a goodwill letter requesting resolution and offer to pay a one-time settlement
A goodwill letter, starting from explaining the problem and your relationship with the bank can help you get the collection account removed from your credit report. Most lenders agree for a resolution if you're willing to pay a one-time settlement.
3.Seek help from best professionals like CreditMantri
However, if you require a professional touch to your problems then you can approach CreditMantri. With a professionally experienced team, CreditMantri can help you with any issues you’re facing on your credit reports.
Collection accounts have a negative impact on your credit score, hindering you in getting a loan, credit card or even landing a job. It's best to consider resolving the issue pragmatically and remove it with possible actions.
How many points will my credit score increase if a collection is removed?
Substantially, your score could go up if you manage to get a collection removed. Collections and delayed payments account for up to 35% of your score. Generally collection accounts could be pulling your score down by 100 or more points, depending up on the information on your report.
However you can’t get your collection removed that easily by just paying it off. Also even if you do pay and get the collection account removed, you cannot expect your credit scores to bounce back immediately. It takes a long time for the impact of a collection account to be fully erased from your credit profile.
How to reduce the impact of a collection account on my credit score?
Step 1: Do Your Research
As long as a collection account is present on your credit report, it’ll hurt your credit score. To reduce the impact of a collection account or to get it removed, you need to first get a copy of your credit report. Have a close look at it and understand what you’re dealing with. Your credit scores depend upon what's reported on the credit report by the credit bureaus.
You can get the report free once a year from the credit bureaus. Or you can sign up for a credit report at CreditMantri to get your latest report with detailed analysis. Checking your credit report timely will help you understand which factor is hindering your rise to excellent credit.
Step 2: Dispute Inaccurate Information and Collections on Your Report
Creditors cannot report information that is inaccurate or incomplete on your credit report. However it is possible that you may find some mistakes on your credit report. Look for it and verify it with proof and raise a dispute on that collection. Request that the collection account be removed from your credit report. This request should and must be honoured by the creditor.
The disputed item will thus be verified with the appropriate source. If the source has not responded within a month then the creditor must remove it. Don’t pay for the debt or collection which does not belong to you. Let your creditor know about this and have them formally remove it from the report.
Step 3: Build Good Credit Habits
While it’s disappointing to know that paying collection accounts won’t immediately help your credit score, keep in mind that as this information gets older, it’ll have less of an impact. That’s particularly true if you’re building new positive credit references.
Try to pay all your bills and EMIs on time, reduce your credit utilisation ratio and be credit responsible. All these positive credit habits help in building your credit score over time, thereby reducing the impact of the collection account on your credit profile.
Conclusion:
Having a loan account classified as collection may feel devastating. But, with the right measures you can build your credit score and develop a strong and healthy credit profile over time. Use the tips listed here to deal with a collection account and if possible try to get it removed from your credit report.
Are you struggling with your credit score? It might be time to look into CreditMantri’s credit resolution service and get expert advice on credit resolution. This service will give you comprehensive insight and solutions to alter your credit troubles.
FAQs
- Can I remove a collection from the credit report?
To remove a collection from your credit report, you have to dispute it with the credit bureau. However, if a collection is legitimate, it'll likely be removed only once the credit bureaus have to do it by law.
- How do I get a collection removed from my credit report without paying?
If you do not pay off a collection, it hurts your credit score and will remain on your credit report until you work towards a good credit track record.
- Will my credit score go up if a collection is removed?
Paying off an account tagged to collections will not improve your credit score. Negative highlights on your credit reports generally remain for seven years and your credit score may not improve until the collections are removed.
- How can I quickly raise my credit score?
Some of the ways to quickly raise your credit score include, opting for higher credit limits, maintaining a low credit utilisation ratio, making bill payments on time, disputing any errors on the credit report, etc.
- How can I get a 900 CIBIL™ score?
To get a very high CIBIL™ score, you must ensure to have a continued positive credit track record, low credit utilisation, good credit history, and limited credit enquiries.
- Why is my credit score not increasing?
Your credit score may not be increasing because of no credit applications or usage and also continued delay in credit repayments.
- What debt should be paid off first?
Always pay off high-interest debt first followed by low-interest one.