Collections and Your Credit Report – Bad Debt and how does it affect your credit report?
The Fair Credit Reporting Act (FCRA) is Federal law. It is evident regarding the credit bureaus’ responsibility regarding the requirements of anything they report. The account (tradeline) must be accurate, verifiable, and timely in reporting.
When a collection hits your credit report, it will impact your credit score. Ideally, you want to talk to the original creditor (not a debt collector). Perhaps they will accept a payment plan and agree not to turn it over to a debt collector as long as you make the monthly payments.
This is typically effective with medical debts. Call the provider as soon as you get the bill and ask for an affordable payment plan, as long as they agree to keep the debt and not give it to a debt collector.
Once a debt collector is reporting it, it has become infrequent that they will delete it from your credit reports if you pay them. This would violate FCRA. The credit bureaus must give accurate and valid information. The best they can do is show the collection with a zero balance. This does nothing to help your score. It will lower it because the clock resets and becomes current when you pay, even if it is a few years old.
I suggest calling and asking if they will delete for payment, but get off the phone if they say no. If they say yes, make them put it in writing the day you make the payment (via email or fax). Tell them that you will stop payment if you do not receive this letter by the end of the business day.
The reality is they don’t delete for payment anymore, and I have seen cases where a customer was told they would and was lied to. I had nothing in writing to prove it. Paying hurt the score, and the debt collection remained with a zero balance.
Is it over at this point? Is there anything else that can be done to get a debt collection off your credit report, especially if you don’t recognize it or think it belongs to you? No, it’s not.
The CFPB (Consumer Financial Protection Bureau) is an additional excellent resource for information about this topic and more.
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