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Collections

Can I Get a Paid Collection Removed From My Credit File?

Paying off a collection account is a good idea for several reasons—but the account won't fall off your credit report just because it's paid. A collection account—paid or unpaid—remains on your credit report and visible to potential creditors for seven years from the date of the first missed payment on the debt in question.

If it seems unfair that paid-off collection accounts don't disappear from your credit report, consider that they represent your failure to make good on a debt you promised to repay. Creditors consider that information important when deciding whether to do business with you, and they are likely to view collection accounts with disfavor, particularly if the default in question is only a few years old.

Do I Need to Notify Credit Bureaus of Paid Collections?

If you pay off or settle a debt with a collection agency, the status of the collection account on your credit report should update to "paid" or "settled" within a month or two. You do not need to do anything to make that happen; the collection agency should notify the three national credit bureaus (Experian, TransUnion and Equifax) to update their records.

If that doesn't occur, you can file a dispute with each of the bureaus to have the records corrected. You'll likely need to provide proof of payment, such as a cancelled check.

How Do Collections Affect Credit?

Creditors view collection accounts as red flags, but likely view paid collections with less disfavor than unpaid ones. The most recent version of the FICO® Score (FICO 9) and versions 3.0 and 4.0 of the VantageScore® credit scoring systems agree: Unpaid collections can hurt your credit score, but paid ones do not.

Some lenders use older versions of both credit scoring systems that still count paid collection accounts, however, and there's no way to know ahead of time which credit scoring method(s) a lender will use when deciding to approve a loan application. So while paid collections on your credit report may still hurt your chances of approval, paying off the account gives an opportunity to do the least possible damage.

Does the Open Date of a Collection Account Determine When It's Removed?

It sometimes takes a year or more between an account's charge-off and its sale to a collection agency, and collection agencies that fail to collect their debts sometimes resell them to still other agencies. That means multiple collection account entries—all related to the same unpaid debt—may appear on your credit reports.

While that's not great news, you need not worry that each new entry has its own seven-year countdown to expiration. Any collection entries related to the same original debt will disappear from your credit report seven years from the date of the first missed payment that led up to the charge-off.

How to Improve Your Credit When You Have Collections

If you have legitimate collection accounts on your credit reports, there's nothing you can do to get them removed before their expiration dates. But you can take steps immediately to start rebuilding your credit and reversing the damage those collections have done to your credit score:

  • Consider paying any unpaid collection accounts. Lenders aren't fans of any collection entry on your credit reports, but they're likely to view collections with a "paid" status more positively than those left unpaid.
  • Pay your bills on time. Lenders are very interested in how reliably you pay your bills. Because they consider past payment history a good predictor of future behavior, lenders view late and missed payments as red flags. And since payment history is the biggest factor in your credit scores, reliably paying bills can help you there as well.
  • Consider getting credit for timely utility and cellphone payments. If you've been keeping current on your utility and cellphone payments, you might be able to improve your Experian credit scores by enrolling in a free program called Experian Boost . You provide Experian access to your utility and telecom payment history and confirm you want the accounts added to your Experian credit file, and your FICO® Score based on Experian data will update instantly.
  • Keep credit card balances relatively low. Your credit utilization ratio—your current credit card debt compared with your total credit limit—is an important factor in credit score calculations. Lenders typically like to see utilization ratios under 30%, and people with the best credit scores often have credit utilization ratios in the low single digits.
  • Apply for and open new credit accounts only as needed. Taking on unnecessary credit can harm your credit score in multiple ways, from causing too many hard inquiries on your credit report to tempting you to overspend and drive up your debt.
  • Avoid closing unused credit cards. As long as they're not costing you money in fees, it's smart to keep unused credit cards open. That's because closing unused accounts when you have other accounts with outstanding balances increases your credit utilization ratio.
  • Dispute inaccuracies on your credit reports. Check your credit reports at all three credit bureaus for any inaccuracies. Incorrect information, including paid collection accounts erroneously marked unpaid, can lower your credit scores. If you see errors on your credit reports, dispute the information and get it corrected right away.

When it comes to accurate collection entries on your credit reports, there's nothing you can do to get rid of them except wait for their inevitable expiration date. So don't fret over past mistakes; instead, try to avoid future missteps, improve your credit habits and rebuild your credit in the process.

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