The Collection Account That Just Won't Die

You didn’t pay a bill because you were unemployed. You moved and never received a medical bill because your mail forwarding didn’t quite work as planned. Or maybe you were just running short on cash and decided to not pay that outstanding utility bill when you moved (don’t do this!).

Whatever the case, it was years ago and, try as you may, this old collection account keeps reappearing on your credit report. You’ve filed disputes. You’ve made phone calls. You’re frustrated because you know that mistake all those years ago is still a red flag for lenders (and even landlords and utility companies) because it’s lowering your credit scores.

So how do you go about getting that collection account off your credit report for good? It’s going to take some persistence, that’s for sure.

First, the Basics

One thing to keep in mind is that there’s little you can do to remove an accurate collection account from your credit reports before the collection account “ages out,” which is typically seven years after the account first goes to collections. That even includes collection accounts you’ve paid off.

“Paid collection accounts are actually not removed from the credit report, they are simply updated to a zero balance and continue to appear for seven years,” Thomas Nitszche, media relations manager for ClearPoint Credit Counseling Solutions, said in an email. “However, under newer scoring models like FICO9 and VantageScore 3.0, paid collection items are no longer calculated in the consumer’s credit score once they reach a zero balance.”

This change, Nitzsche said, was made so consumers would actually benefit by paying the accounts, “because under older scoring models there was no credit score benefit to paying off an old collection debt.”

FICO9 also does not include medical debts on consumers’ credit reports for the first 180 days in order to give insurance time to pay and the consumer time to work out paying off any remaining balance, Nitzsche said. And when medical debt is reported, even with a balance, it doesn’t carry the same negative weight in the credit score calculation that it used to.

“That said, it could be years before everyone is using FICO9,” Nitzsche said. “Most lenders are still using FICO8. For consumers, the most important things are to work with creditors to keep them from going to collections in the first place and, if they are already in collections, make sure that their credit report is updated to a zero balance once they pay them off.

But My Collection Account Is More Than 7 Years Old!

If this is your case, there are several things you can do.

“The squeaky wheel gets the oil, so I always tell my clients to make as much noise as possible if they have a debt that’s been reported more than seven years,” Nitzsche said.

He suggests filing disputes with all three credit bureaus, TransUnion, Equifax and Experian. (You can check out these handy tips for how to write a dispute letter.)

“File the disputes after reviewing all three credit reports at AnnuaCreditReport.com, and include as much supporting documentation as you can provide.”

If the collection account remains, or if it resurfaces after a period of time, escalation might become necessary. In that case, Nitzsche recommends:

Filing a complaint with the Consumer Financial Protection Bureau.
Filing a complaint with the Better Business Bureau.
Filing a complaint with your state’s attorney general (often a form on their website).
Sending an executive complaint with “office of the president” of the company who reported the debt (usually has to be in writing, and sent via certified mail with a return receipt requested).
As a last resort, contact your local news affiliates — one with an “on your side,” “I-team” or dedicated consumer reporter is a good place to start, Nitzsche said.

What About Credit Repair?

Again, if the collection account is accurate and it is still too soon for it to have aged off of your credit reports, there’s really nothing that reputable credit repair companies can do. However, if you’ve tried unsuccessfully to get an inaccurate blemish removed from your reports, a credit repair company could be an option. But unlike the free steps above, it will cost a small fee. Just make sure you’re dealing with a legitimate, reputable company.

“There are some for-profit ‘credit doctors’ who claim they can have [legitimate] negative information removed from your credit report,” Nitzsche said. “They work by barraging the credit bureaus with disputes in the hopes that the debt is not affirmed by the creditor. This is basically a misuse of a loophole in the credit reporting system whereby the creditor must affirm the debt within 30 days of the dispute or it must be removed.”

You can see how your debt, possible collection accounts and other financial matters are impacting your credit by viewing your free credit scores on Credit.com.

Image: Pekic