How to Clear a Collections Record

A blemish on your credit report can cause a multitude of headaches when applying for new lines of credit. Whether you're shopping for a new car, trying to open a credit card or applying for your first home loan, the items on your credit report can make or break the deal. Having a collections record on your credit report indicates that a creditor had to implement collection efforts to collect a debt. This shows potential creditors that you not only failed to pay your debt, but also neglected to respond to earlier debt collection efforts.

Instructions

1

Obtain a free copy of your credit report. Everyone is entitled to receive one free copy of their credit report once a year by contacting the individual credit reporting agencies (Experian, TransUnion and Equifax are the top three). You can also obtain a free 3-in-one report through annualcreditreport.com.

2

Locate the debt and the creditor on your credit report. Contact the collection agency, and request the representative to remove the debt in exchange for full payment. Since the chances to successfully collect on a debt decrease over time, many collection agencies will agree to remove a negative mark from your report if it means they'll get paid.

3

Request a settlement in addition to having the debt removed from your credit report if the debt is larger than you can afford to pay outright. In a settlement, the collection agency accepts an agreed-upon amount of money and marks the debt as paid in full. Collection agencies often agree to do this to collect a debt that would otherwise remain unpaid, and are often willing to reduce the total debt by up to 50 percent.

4

Dispute the validity of the debt if you feel it is invalid. Contact the credit reporting agency directly and file any forms they request. Once you formally dispute a debt, the credit reporting agency will notify the collection agency and ask it to prove the debt is valid. If the collection agency does not respond or cannot provide the necessary documentation within the alloted time, the debt is automatically removed from your report. If the documentation is provided, the debt will be marked as valid and you will remain responsible for payment.