A collection becomes known as a “charge-off” when it is sold to a third party collection agency. This happens when an initial creditor decides to quit contacting you to collect the debt. Collection agencies are proficient in getting you to part with your money.
Will a Collection Damage my Credit Score?
Once a debt has been sold, the way it is reported on your credit record changes from bad (late bill) to terrible (collection). Collections may appear in various forms on your credit report including: unpaid collection, paid collection, or collection – paid or settled for less.
Lenders look for charge-offs, even if they are eventually paid, because this will alert them to the fact that you once defaulted. This type of credit activity will serve as a red flag to them.
Is It Possible to Remove a Collection?
Yes, a collection can be removed from your credit report. It does not have to be reported for 7 years. In fact, many people have found that the opposite is true.
Unless you attempt to remove a collection, the credit bureau or creditor will determine how long the collection will stay on your credit report. Therefore, it is up to you to convince these businesses to report accurate information. In essence, you are in a position to clean up and rebuild your own credit.
Under the Fair Credit Reporting Act (FCRA), you have the right to challenge any negative entries listed on your credit report. A copy of your credit report will need to be obtained in order to review the listed information and determine which collection agencies are present. You should not expect your credit reports to be the same as the credit bureaus maintain a separate file on your credit activities.
Ultimately, you will need to dispute every negative entry on your credit report. Often, following this procedure will result in the removal of several negative entries with no additional follow-up.
What is the Next Step if a Dispute Doesn’t Work?
If your dispute is unsuccessful, you may consider additional methods. At this point, an experienced and knowledgeable attorney may be helpful.
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