One of the items that can lower your credit score by quite a bit is an open collections account. If your credit account has gone to a collections agency, it can be an indication that you are pretty far behind in your payments. An open collections account is one that is not considered “paid” or “current”. There is no way for you to force an accurate collections account to be removed from your credit report, although a collections agency might do so if you pay the account in full. Here are some of your credit repair options if you have a collection account on your credit report:
Having the Account Deleted from Your Credit Report
The best outcome for your credit score is to have the collections account deleted from your credit report. You will need to negotiate with the collections agency to have this done. You can write a “pay for delete letter” offering to settle the account for less than you owe. Before you do anything, wait for a written response agreeing to your terms, or countering with a higher amount.
Some collections agencies will only delete your account if you pay the account in full. If the agency agrees to remove the collection account from your credit report if you pay the account in full, you can pay as requested. Make sure, though, that the agreement is in writing. Keep proof of the agreement, and proof of your payment, so that you have something to fall back on if there is a dispute.
Getting the Account “Paid in Full” or “Settled”
In some cases, even if you pay the account off, the collections agency won’t delete the account from your credit report. You can’t make them, either, if the information is accurate. However, you can see an improvement in your credit score if you can negotiate the account to be “paid in full.” Even if you settle for less than you owe, some collections agencies will agree to mark the account this way. That can help you see a bit of an improvement in your score.
Realize, though, that some collections agencies won’t list your account as “paid in full” unless you do, in fact, pay in full. Instead, they will mark the account as “settled”. You won’t get as much of a credit score boost from a “settled” account as one that is “paid as agreed” or “paid in full”. However, it’s better than having an open collections account.
Making Sure Your Credit Report is Updated
After you have the agreement in writing, stating what you have to pay, and how the collections agency will report it to the credit bureaus, it’s time to monitor the change. If you have been rejected for credit, you can get a free copy of your credit report and possibly your score, within 60 days. You can also check with annualcreditreport.com for information about your free annual credit report.
Give it 30 to 60 days to provide time for the collection agency to make the submission to the credit bureaus. Check to see that things have been updated as agreed; if they haven’t, you can send a copy of your agreement with the collections agency (keep the hard copies) to the credit bureaus.