How to Delete Collection Companies from Your Credit Report

Discharging entries from collection agencies on a credit report can be irritating. Some collection agencies may be slow in reporting to a credit agency on the status of their loans. Particularly unscrupulous companies may attempt to avoid upholding their agreements, sometimes demanding further payment to expunge an entry on a credit report. Keep accurate records of all dealings with collection agencies and educate yourself on your rights to protect yourself against such fraudulent behavior.

Instructions

Getting Collection Requests off of Your Credit Report

1

Contact the collection agency in writing to inquire about the debt they are attempting to get you to pay. Request that any agreement they make with you be provided in writing. Verbal agreements are not possible to prove. Make copies of all correspondence with the collection agency.

2

Determine whether the collection agency in question has acted legally to collect on your debt. (Read the Fair Debt Collection Practices Act Brochure listed in the Resources section below.) If you have written proof that they have violated federal or state debt collection laws, you may not be obligated to pay them, and they may have to expunge their collection request from your credit report.

3

Follow the terms of any agreement that you reach with the collection agency. Make any payments that are necessary. Request directly that the collection be removed from your credit report as part of the terms of your agreement.

4

Wait for your credit report to be altered. If the entry is not corrected as per the terms of your agreement with the collection agency, file a dispute with the original company to which you owe a debt, along with copies of all relevant documentation such as cleared checks, bank records, correspondence, and receipts.

5

Consider waiting seven years for the collection request to be expunged from your credit report. This is the most damaging path to take for your credit score, but credit reporting companies are required to remove even unpaid collection requests from your report seven years after the initial claim.

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The Fastest & Easiest Way to Build Up Credit

Rebuilding credit after a bankruptcy or credit consolidation process is not easy. You cannot do it instantly. It takes time, effort and discipline. But it is important to re-establish a solid, good credit history as fast as possible. The time this process takes really depends on you and the financial setback you have experienced.

Retain a Credit Card

Under certain situations, you can keep a credit card when faced with bankruptcy, consolidation or foreclosures, so long as you make the payments on time for that credit card. Once the financial situation has been resolved, on-time payments for this credit card will help build good credit.

New Credit Account

If all your credit accounts were closed, you need to open a new account to re-establish credit. In most cases you won't be able to open a regular unsecured credit account, so you will need to get a secured credit card. This type of card requires a cash deposit in the amount of credit limit being offered. This deposit offers the lender security as to the payment of the credit card balance, but after a certain time has passed, this deposit is returned to you. Once you have a credit card, make small credit charges and pay them off every month. This will start rebuilding your credit score quickly.

Timely Payments

Make all of your payments on time. This includes payments for utilities, rent, mortgage and credit cards. On-time payments increase your credit score, whereas late or missed payments will lower your score even more.

Credit Score

Pull your credit history every three months to six months to make sure payments are being reported and that all the information being reported is pertinent to your accounts. If anything is incorrect, report it immediately to get it removed from your credit history. Pull a report from all three credit reporting agencies, Experian, TransUnion, and Equifax, as not all credit reporting agencies have the same information.

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Ways to Improve Credit Score Quickly

Although the most tangible way to improve credit scores is to pay bills on time over a period of years, consumers can take several key steps to improve their credit scores quickly. It can be particularly useful to complete these steps over several months before applying for a car loan or mortgage.

Fix Incorrectly Reported Information

One of the quickest and easiest ways for consumers to improve their credit scores is to obtain a copy of their individual credit reports and correct any inaccurate information. An old medical or utility bill previously settled may still be reported as late or unpaid, a credit card may show an incorrect balance due, a previous mortgage payment may have been credited late because of a bank error, or a tax bill may have been disputed or incorrect. In all such cases, consumers should write to the creditor, who is obligated to either verify or remove the negative item at hand.

Bring All Accounts Current

If consumers habitually pay a credit card a few days late, this will have no bearing on their credit score, as negative information is reported only after a delinquency of 30 or more days. However, if they are typically a month or two behind, a proactive way to address this is to apply for a debt-consolidation loan or mortgage refinance, obtain a second job or borrow money from friends or family to become current on all bills. Within just a few months of bringing those accounts up to date, your credit scores will improve notably.

Pay Down as Much Debt as Possible

One of the primary factors in a high credit score is a low usage-to-available-credit ratio. If credit utilization is at or near the available credit on even one or two accounts, this presents a red flag to potential creditors as it suggests some sort of financial trouble. Paying those cards down by whatever means available will immediately improve your credit score.

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How Does Closing a Savings Account Affect a Credit Score?

Credit scores measure consumers' "creditworthiness," or their likelihood to repay debt. Many things impact credit scores, such as credit cards, recent loans and home purchases. However, closing a savings account has no effect on a person's credit rating.

Significance

Savings accounts are not tied to a loan or a line of credit, so they do not show up on credit reports, according to My Bank Tracker. Credit bureaus use only the information on a person's credit report to calculate her credit score.

Misconceptions

According to My Bank Tracker, a common misconception is that individuals can use debit cards, which are sometimes tied to savings accounts, as a line of credit. However, though these cards often bear credit card logos, they are not lines of credit.

Potential

Although closing a savings account does not impact your credit score, keeping your savings account open allows you to earn a small amount of interest on your saved money. Having a large amount of funds saved helps protect you from financial emergencies, allowing you to avoid missing payments and ruining your credit score.

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How Does Third Party Intervention Impact Your Credit Score?

3.2 million people called the National Foundation for Credit Counseling for debt management help in 2010. Third-party intervention for debtors usually results in the customer improving his credit score, but some people can see a drop in their scores just by using such services. Ultimately, third-party intervention can do little to help a credit score or a debt situation if the debtor does not make enough money or has an unsustainable budget.

Identification

Third-party intervention for debt management often means a credit counseling service. This type of organization charges a monthly fee, sometimes up to $140, to negotiate lower interest rates and monthly payments on behalf of the debtor. This will not affect your credit score, according to the BCS Alliance.

History

In 1989, when credit scoring become commonplace in the lending industry, having credit counseling service on your report would lower your score. By 1998, the FICO formula dropped the negative impact of credit counseling on scores because more people in counseling entered before debt spiraled out of control.

Potential for Damage

Instead of the debt management company, it is the creditors who could damage your score while in counseling, according to Kiplinger. A lender may report an account as not "paid as agreed" if your management plan constitutes of reduced payments or interest that brings the monthly installments lower than those called for in the original schedule. The severity of the damage depends on how good your score was before counseling

Debt Settlement

An alternative to credit counseling is a professional debt negotiator, called a debt settlement company. A debt settlement company works with a debtor and could settle an account for as little as 20 cents on the dollar. This almost always results in a negative item on your credit report that notes the account was settled for less than the original balance.

Warning

The Better Business Bureau highly recommends consumers avoid credit repair services that guarantee to repair credit or want an advance fee. No company can raise a score with 100 percent certainty, and any knowledge they have is widely available for free.

Tip

You can probably draft your own debt management plan without the help of a counseling agency. Start by eliminating frivolous spending and focus on the debt with the highest interest and work your way down. You can refinance your own debt, shifting a balance with a high interest rate to an account with a smaller one. You can call your lender's customer service line yourself and ask for a interest rate reduction or a restructured payment plan.

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What Affects Your Credit Score Negatively?

Your credit score weighs information from your credit report from five main categories. There are a few actions in each category that will negatively affect your credit score. If you are planning to apply for new credit soon, keep your score high by avoiding these actions.

Payment History

Because your payment history makes up 35 percent of your credit score, actions in this category have the most potential to negatively affect your credit score. The worst one is declaring bankruptcy, which can suddenly drop your score by more than 200 points. Settling debts for less than you owe, as occurs in foreclosure or settling a credit card debt, also damages your credit score. Lastly, each late payment and collections account on your credit report negatively affects your credit score.

Amount of Debt

About 30 percent of your credit score is based on the amount you owe on each of the accounts on your credit report. If you borrow more money, the amount you owe will increase and your credit score will decrease. One special area to pay attention to is your revolving credit utilization. Your credit score drops as you use a higher percentage of each credit line. Maxing out one credit card can drop your score by up to 45 points, according to Fair Isaac Corp.

Length of History

Having a short credit history negatively affects your credit score. This is because 15 percent of your score considers how long you have been managing credit. If you have a longer credit history, you have likely developed more skills with managing money and paying bills than someone with a short credit history. Therefore, if you have just begun using credit, this affects your score negatively. In addition, if an old credit account drops off your credit report, this also might hurt your score a little bit.

Types of Credit

About 10 percent of your credit score considers the variety of types of credit you manage. The two major types are installment loans, which involve borrowing money all at once and paying it back with equal monthly payments, and credit lines, which allow you to continually borrow and pay back varying sums of money. If you lack one of these two major types of credit on your report, this will negatively affect your score. In addition, if you have too many accounts of a specific type, such as store credit cards, this could also hurt your score.

Recent Credit

Applying for and opening credit accounts hurts your credit score for a short time. About 10 percent of your score considers your new accounts, in particular, how many you have compared to old accounts and how recently the new accounts were opened. Therefore, each time you open a new account, it will hurt your credit score a little bit. In addition, each time you submit a credit application that triggers a credit check, that will hurt your score as well. This is because people who apply for lots of credit tend to be in financial trouble and are more likely to default on payments.

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Can I Request That Negative Information Be Removed From My Credit Report?

Negative information on your credit report can hinder your chances of securing financing on large purchases and qualifying for loans, or make it harder for you to rent an apartment. While legitimate negative information will stay on your credit report for several years, depending on the default type, you can ask credit bureaus to remove erroneous negative information from your report.

Reporting Credit Bureaus

Even though you can order a credit report from one source, information provided by three separate credit bureaus make up this report: TransUnion, Experian and Equifax. If you find an error on the credit report that causes you to have a negative score, or you are a victim of identity theft, contact the credit bureau that shows the error, not all three bureaus. Errors that affect your credit report negatively can include claims that you went over a spending limit on a credit card, debt payment defaults, late payments and lines of credit that you did not open that resulted from identity theft.

Contacting Credit Bureaus

If you find negative information on a credit report that you want to dispute, you can file a claim through the respective credit bureau's website by filling out an online dispute form. The Federal Trade Commission recommends on its website that you write a letter to the respective credit bureau to make it aware of the negative information that you found and want to dispute. However, before you contact a credit bureau, the FTC recommends you make a list of all the negative information you wish to dispute, starting with the oldest error. According to the FTC, it can take up to a month for a credit bureau to begin an investigation regarding a dispute.

Written Requests

When you write a letter to a credit bureau, let the bureau know that you found false negative information on your credit report. Explain that you want the negative information removed and that you want to file a dispute. In the letter, list the accounts that have the negative information, the dates of the errors and a description of each error found. It is a good idea to enclose documents that support your claims and let the bureau know about the included paperwork when you write the letter, along with a copy of your credit report. In addition to mentioning the documents in the body of the letter, write "Enclosures:" a few spaces below your signature, followed by a list of the documents you provided.

Support Documents

Including support documents with your written request helps prove that you have just cause to file a claim. Documents that can help support your claim include bills, canceled checks, bank statements, and in the case of identity theft, police reports. Do not send the original versions of your support documents. Instead, provide the credit bureau with a copy of your credit reports and supporting documents. On the copy of your credit report, use a highlighter to indicate the negative information you want removed. Then, use a highlighter to mark the areas on your support documents that prove that a negative credit event did not occur.

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