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Credit Repair Drill

Credit Repair Drill

Putting your credit pieces back together

Collections – How they affect your credit

Understanding the effects of a Debt Collection on your credit

We have all heard the term, "being sent to collection". When debt accounts are more than 180 days past due, creditors usually sell or turn over the account to a collection agency. A collection agency or debt collector is a third party organization that specializes in debt collection. In most cases, once your debt has been sold, calling the lender won't do any good.

New Collection on your Credit Report

Scenario One:

You have new collections on your credit report.
Are there collections on your credit report?
Is it a new collection?

Suggestion:

1. Pay off the collection and request the collection agency to report it as "Pay for Delete".
2. If the collection agency doesn't agree to "Pay for Delete", negotiate for a "Paid collection" status on your credit report.
3. If the collection is 2 years old, it is better to pay it off before you apply for mortgage.

Note: VantageScore 3.0 Ignores paid collections and so does the new FICO 9 model

Old Collection on your Credit Report

Scenario Two:

You have old collections on your credit report.
Are there collections on your credit report?
Is it a new collection?

Suggestion:

1. Check if the statute of limitations (SOL) has expired; then legally you don't need to pay.
2. If the debt is old enough or the statute of limitations (SOL) is about to expire, don't pay it off or send a written promise to pay or else the statute of limitations (SOL) starts over again!.
3. If 7 years have passed till the date of delinquency, check if the collection is removed from your report or else negotiate with the Credit reporting agency (CRA) to remove it.
Understanding Credit
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Negative Items

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How long negative information stays on your Credit Report


Collection accounts: 7 years

Charged off accounts: 7 years

Late payments: 7 years

Civil judgments: 7 years

Chapter 13 bankruptcy: 7 years

Chapter 7 bankruptcy: 10 years

Inquires: 2 years
Tip of the day!