Can You Remove Collections from Your Credit Report?

When financial institutions loan money or extend lines of credit to borrowers, they do so with the expectation that they’ll get that money back. But if the promise of full repayment starts to look shaky, creditors may turn to a collection agency to recoup the money, which can significantly impact the borrower’s credit score and leave a blemish on their credit report.

When a borrower fails to make payments on a debt for several months, the creditor or lender may move the account to a third-party collection agency or sell it off to a debt buyer. The collection agency will then pursue the borrower for all or part of the debt, in accordance with the Fair Debt Collection Practices Act (FDCPA) – federal guidelines enacted to protect consumers from “abusive, deceptive, and unfair debt collection practices.”¹

With timely payments, this won’t happen to you. But if it does, be aware that a debt typically won’t be turned over to collections for at least 30 days after the delinquency begins, and usually only after the creditor or lender has made multiple attempts to contact you directly by mail or by phone.

Once an account gets transferred to collections, that establishes a new collection account on your credit report. Meanwhile, the late payment is reported as an adverse item under your credit account information.

An exception is medical debt in collections. In 2017, the three major credit bureaus began to wait an additional 180 days after a medical debt went to a collection agency before it could adversely affect your credit score. And as of July 1, 2022, the credit bureaus must wait a full year before reporting unpaid medical debt in collections – and paid medical collection debt will no longer appear on credit reports.² These changes came about as a way to address the extended time often required to sort out insurance and billing issues.

Collection accounts can remain on your credit report for up to seven years from the date the original debt went delinquent. In other words, the clock doesn’t “reset” when the debt is turned over to a collection agency.

For example, if your last on-time payment was made on January 1 and your original creditor sent your debt to a collection agency after 90 days, the clock would start ticking in January – not April.

Even if you pay off the collection account before the seven-year period is up, it can remain on your credit report. However, it might have less of an impact on your credit score over time.

There’s peace of mind in knowing that you have paid off a collection account. But unless the debt is medical collection debt, it still sits on your credit report, and it likely will stay there for up to seven years. Unfortunately, while many sources might suggest “goodwill deletions” are a possibility, credit bureaus legally cannot delete accurate or verifiable information.³ The only thing you can do is wait it out. The good news is that the deeper you get into the seven-year run, the less one ding will factor into your payment history.

Mistakes happen, so if a debt in collections erroneously appears on your credit report, there’s no reason for you to incur any adverse effects. If you spot a collections account on your credit report and think it’s a mistake, the Fair Credit Reporting Act (FCRA) allows for you to dispute the error.⁴ To do so, take the following steps:

1. Review all of your credit reports. Yes, all three. Check Experian, Equifax, and TransUnion to confirm the collection account’s inaccuracy and from which creditor it originated.

2. File a dispute with the credit bureau. Each credit bureau has an online dispute form you can fill out to begin the process.⁵ You can also file a dispute by mail or via a phone call. The credit bureau will usually review your claim within 30 days. If they agree with your claim, the credit bureau will forward the information to the furnisher, who should then remove the error from your credit report.

3. File a direct dispute with the furnisher. You may also file a dispute directly with the company that provided the information to the credit bureau, also known as the furnisher. The Consumer Financial Protection Bureau (CFPB) provides a template to help you file the dispute.⁶ If the furnisher determines the reporting is incorrect, they must remove it from your report or correct any wrong information.

In short, it depends.

Credit scoring models such as FICO 9, VantageScore 3.0, and VantageScore 4.0 ignore paid collection accounts – meaning any paid accounts could help elevate your credit score. The hiccup here, however, is that many lenders still use older credit models such as FICO 8, which factors in any zero-balance collections against your payment history, and therefore can negatively affect your credit score even after repayment.

Still, it’s possible that paying off a collections account could boost a lender’s evaluation of your creditworthiness, regardless of which credit scoring model they use.