There are FOUR proven tactics for removing Collection Accounts from Credit Reports, and today, I'm gonna walk you through each one!
When a debt goes to Collections, the impact can be devastating! They damage your credit score. They make it harder to get a loan or a car. And Debt Collectors start harassing you.
But worst of all, Collections are one of the most common derogatory items that appear on Credit Reports!
The recession, increased dependency on credit cards, skyrocketing student debt, and the lack of affordable healthcare are all making life more difficult for people and forcing them into collections. So if you're in this position, you're not alone.
Roughly 28% of Americans have at least one debt in collections, and having just one Collection can decrease your credit score by as much as 110 points! And that's a LOT!
Thankfully, you can delete Collections from Credit Reports. It is a process. So today, I'm going to share with you Four proven tactics that will help you get the job done as fast as possible!
HERE'S HOW THIS RELATES TO US
For anyone new to Credit Repair, a Collection refers to a lender attempting to recover payment on a debt that a borrower has failed to pay.
When a debt is moved to collections, it usually means that the lender has exhausted all other options for collecting payment and has now sold the debt to a third-party collection agency to try and recover the money.
These Debt Collectors are aggressive, they stretch the truth, and in many cases, they break the law.
And If you want to learn how to fight back against shady Debt Collectors and make money by suing them, check out my interview with Vance Dotson. It's a good one.
HERE'S THE THING TO REMEMBER
Collections stay on Credit Reports for up to seven years. Removing them is a process, and even if the debt is paid off, the problem doesn't go away!
Paying off a collection can cause credit scores to increase, decrease or have no impact at all. It all depends on what information changed with the collection account and the other information on the credit report.
Even FICO admits, "whether or not you pay your collections off is really a personal decision."
There are benefits to paying off the debt. You can avoid collection lawsuits and interest fees. The collection will appear on your credit report as "paid in full" or "settled", which may influence lenders. And newer credit-scoring models like FICO 9 will ignore zero-balance collection accounts entirely.
But most lenders still use older scoring models like FICO 8 that still factor in zero-balance collection accounts.
HERE'S WHY THIS IS IMPORTANT
Just because newer credit-scoring models ignore collections with a zero balance does not mean lenders will ignore them.
Credit bureaus will still show these collections on your full credit report, lenders will still see them when they review your full credit history, and you will have to be prepared to explain why they are there.
So, whether you pay off the debt or not, you still want to remove the Collection from your Credit Report because that will make your score go way up!
HERE'S WHAT YOU NEED TO KNOW
As always, your first step is to Dispute any incorrect information on the credit report. But beyond that, there are FOUR proven tactics for removing Collection Accounts from Credit Reports…
TACTIC #1
Send Dispute letters directly to the credit bureaus requesting verification of the debt and the removal of any unverified items from the credit report. We call these first letters: ROUND 1.
Regardless of the type of collection, the bureaus are required to contact the furnishers that reported your information to verify the debt. After contacting the furnishers, they only have 30 days to respond. If they don't respond in time, BOOM!
The items you disputed are deleted automatically.
If you don't already have a ROUND 1 Dispute Letter Template, you can download it FREE at CreditRepairCloud.com/Dispute-Letter-Templates.
If the bureaus do not respond appropriately or they respond with a Stall Letter, you may need to request a reinvestigation, demand to know their method of verification, or send them a warning letter.
This process takes time, but if you don't get the result you want, you may want to file a complaint with the CFPB, the FTC, or your State Attorney General, or even bring in an FCRA attorney and take them to court. This is not legal advice. This is simply an option available to you.
Reinvestigation, Method of Verification, and Warning Letters are also FREE to Download at that same link: CreditRepairCloud.com/Dispute-Letter-Templates.
TACTIC #2
Challenge the collection with the original creditor using Section 312 of the Fair and Accurate Credit Transaction Act or send a Validation Letter to the Debt Collector directly, requesting that they prove the debt is accurate.
This can also go back and forth, just like it did with the bureaus - but again, the key is persistence and pressure. If the original creditor does not delete the item, you can follow up with reinvestigations, warnings, or complaints.
TACTIC #3
If the Debt Collector ignores your debt validation request and more than a month has passed, send them a "Validation of Debt (Estoppel By Silence)" letter. This letter tells them that by ignoring you and being silent, they must agree with your argument.
This is backed by case law and could stand up in court if it ever got that far.
If the Debt Collector does not delete the item, you can do the same process of demanding reinvestigations, sending warnings, filing complaints, or partnering with an FDCPA attorney to file a suit against the Debt Collector.
At this point, if you've completely exhausted your options with the bureaus, the original creditor, and the debt collection agency - it may be time to bite the bullet and negotiate a payment arrangement directly with the Debt Collector.
TACTIC #4
Offer the lender or collection agency a Pay-Per-Delete or a Settlement. In this situation, you will offer either a full or partial settlement in return for the deletion of negative items. Most Debt Collectors will do this, but most will want the full payment.
KEEP IN MIND
Removing the collection account from your credit report will raise your score a lot, but it doesn't actually remove the actual debt itself. You still owe that debt, and that Debt Collector can still take you to court and sue you. But remember, they've usually bought this debt for much less than you owe, so you can usually negotiate with them.
Now, it is important to be careful when settling an old debt. If you have a collection account scheduled to fall off your credit report soon and you negotiate a settlement, it will restart the status date and stay for an additional seven years showing as a "paid collection," which can do more harm than good.
That's why it really helps to try for a Pay-Per-Delete, where you're paying them to remove the item. Just make sure you always get proof of the agreement in writing before moving forward.
MY FINAL POINT
Dealing with Collection Accounts can be financially and emotionally draining, especially when Debt Collectors are involved. Remember, be persistent, apply pressure, follow the proven tactics, and don't give up!
I'll end by saying…
If you don't already have a Credit Repair Cloud account, check it out. It's the software that most Credit Repair businesses in America run on. Just sign up for a 30-Day Free Trial at CreditRepairCloud.com/freetrial.
And if you'd like to change lives and grow your own credit repair business, check out our Credit Hero Challenge!
It's an amazing program, and we've got another challenge starting in a few days, so grab your spot right now at CreditHeroChallenge.com!
So take care, Credit Hero!
Keep Changing Lives!