Collections on your credit report are hardly uncommon. Often they don’t even come from a regular creditor, but from someone who you’ve done business with in the past. It could be a landlord, a utility company, or a repair company. If you have an unpaid balance with them, or if they even think that you do, they can put a collection on your credit report.
Once they do, it will be up to you to have the collection removed. And that’s an effort you should always make.
Never Ignore Collections!
People will often ignore collections that appear on their credit reports. There are at least four reasons why this is true:
- They assume that “it’s no big deal”
- They don’t agree with the reason for the collection
- They purposely don’t pay it, because they had a bad experience with the creditor, and think that they are somehow punishing that creditor by not paying the collection
- They don’t have the money to pay off the collection
While it’s easy to sympathize with any of these reasons, each ignores the fact that the existence of the collection on their credit report is hurting their credit score. This is an even more important consideration when a credit report reflects several unpaid collection accounts.
That by itself can indicate a pattern of nonpayment, which can have an even more disastrous impact on future business dealings than an impaired credit score. A future lender, vendor, business associate or employer may assume that it means that they won’t get paid either, if there is any kind of financial disagreement with you.
Then there’s the obvious fact that unpaid collection balances could lead to creditor harassment, or even legal action against you.
The only way to guarantee that none of these negative outcomes will take place is to have the collection settled or removed from your credit report.
If They Aren’t Accurate, Dispute Them and Have Them Removed
If you believe that a collection is an error, then you should dispute it and make an effort to have it removed from your credit report.
In fact, collection accounts often are the result of creditor error. For example, a creditor may show you late on a recent payment. Even though you ultimately make that payment, a clerical error could convert a late payment into an unpaid balance, and therefore a collection.
Still another source of erroneous collection account entries are due to mistaken identity. If either your name or your Social Security number are close to someone else’s – someone who actually does owe the debt – the collection may be assigned to you instead to the real debtor.
The problem from there has to do with the nature of collections: if left unattended, they tend to take on a life of their own. In fact, under certain circumstances, an unpaid balance will be assumed to be yours in the absence of action on your part.
Whatever the circumstances behind the collection, if it is in fact an error, you should dispute its existence and its attachment to you. In some cases you can simply dispute it with the original creditor, and if they have no record of it being specifically yours, they will take it out of your name.
In other cases, you may have to furnish written evidence that you are not responsible for the collection.
In either case, if the collection really is an error, the burden will fall on you to have it corrected or removed from your credit report with each of the three major credit bureaus – Equifax, Experian and Transunion. And unfortunately, that’s not the easiest task to perform successfully.
If You Do Owe Them Then Pay Them as Soon as Possible
If you do actually owe the collection, the best strategy is to pay it immediately. And if you can’t pay the entire balance, you should contact the original creditor to work out a settlement for a lower amount. All correspondence, agreements and payment should be written and clearly detailed so that the creditor cannot disavow the settlement at a later date. (That does actually happen!)
Paying off a collection doesn’t mean they disappear from your credit report. It will actually remain on your credit report as a paid collection for up to seven years.
Unfortunately, even paying off a collection won’t necessarily make it go away.
Collections Aren’t the Easiest Entry to Remove From Your Credit Report
Collections tend to be more difficult to remove from your credit report, even if you successfully dispute them or pay them off. The problem is in what we might refer to as the collection chain process. That is, the original creditor will report a past due balance, then turn it over to a collection agency. That agency in turn may sell the collection to yet another collection agency. At that point, it’s possible that your credit report will reflect three separate collection accounts to different entities. And that can complicate the removal process substantially.
The problem is that you can’t make all three collections go away simply by disputing or paying off a collection balance with the original creditor. Even if you do, the collection is likely to continue to appear on your credit report under the subsequent collection agencies, each of whom will infer a claim against you.
If you have multiple collection accounts where this has happened, you’re going to have your hands full for a very long while. Sometimes it’s impossible to determine the original source of the collection balance. Other times, one or more agencies in the collection chain may no longer exist, or may otherwise be uncooperative. However it plays out, it may not end happily.
What to Do With Big Collections Where the Agency is Playing Hardball
If there is a particularly large collection balance on your credit report, and the original creditor and/or collection agency are not being cooperative, and you don’t have the money to pay them off, you could have a serious problem. A collection can ultimately be converted into a judgment, and if that happens you could face wage garnishment or even bank account seizure.
If you are facing this kind of situation, the best advice is to get legal help. That helps you retain the services of a law firm that specializes in credit and credit repair. Sometimes just having a law firm involved in the negotiations on your behalf will make an uncooperative creditor come to the negotiating table. And if they don’t, the law firm can bring the situation to a legally suitable conclusion.
Whatever you do, don’t ever ignore collections on your credit report. They represent a strike against you, and one that can magnify over time. You do have options, but you have to take advantage of them to get control of the situation. The sooner that you do, the less damage the collection will do to your credit and to your life.