Collection agencies regularly report consumer debts to the credit bureaus. A collection account within your credit history has a significant derogatory impact on your credit score and can cause lenders to turn you down for new credit. Depending on the collection agency that currently holds your debt, you may be successful negotiating for the removal of the negative entry from your credit report.
Facts
A collection agency may agree to modify its reports to the credit bureaus in exchange for payment. While certain collection agencies will provide this service and also offer you a settlement agreement, others only delete negative credit report entries in exchange for payment in full. Still others do not modify credit reports at all. Every company's policy regarding modifying credit bureau reports differs.
Features
Debt collectors make a commission on the debts they recover. Because of this, unethical debt collectors say whatever is necessary to coerce debtors into making payments. Unfortunately, this includes agreeing to modify credit bureau reports. If a debt collector agrees to your proposal, asking for the agreement in writing before sending the company a payment protects you in the event the collection agency fails to modify its negative report.
Time Frame
While you can negotiate with collection agencies to remove their negative reports from your credit history, you only need to do so if you incurred the original debt within the past 7.5 years. According to the Fair Credit Reporting Act, unpaid debts older than 180 days are subject to a seven-year run on your credit report. After seven years, the original debt, and any subsequent collection accounts that resulted from your failure to pay it, will vanish from your credit history.
A collection agency that inserts negative information on your credit report for a debt older than 7.5 years is in violation of federal law. You do not need to negotiate with the company to remove its entry. You can demand that it remove the report and file a lawsuit against the collection agency should it fail to do so.
Considerations
Negotiating with collection agencies is most effective if the company knows it cannot collect the debt from you any other way. Although a collection agency can sue you, it can only sue you for a limited period of time before the debt becomes obsolete. The statute of limitations in each state determines when a lawsuit is no longer an option for a creditor. A collection agency that has no other way of collecting the debt will be more willing to negotiate with you for payment.
Warning
If you agree to a payment plan with the collection agency in exchange for full deletion of the negative report once you pay off the debt, missing a payment nullifies the agreement. This gives the collection agency the right to let the derogatory report remain on your credit report, even if you resume payments.
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