How to Explain the Collections on Your Credit

Although many consumers realize that lenders and creditors review their credit records before granting them new lines of credit and loans, some do not know that insurance companies, landlords and even employers also pull and review credit reports. Collection accounts on your credit report signify that you did not responsibly pay off your debts in the past and thus may not do so in the future. The Fair Credit Reporting Act (FCRA) gives you a way to explain the circumstances behind collection accounts to anyone reviewing your credit history.

Instructions

1

Pull your credit reports and review them for collection accounts. The credit-reporting bureaus (Experian, Equifax and TransUnion) do not share information with one another unless a consumer files a complaint about identity theft. Because of this, collection accounts may not appear on all three of your credit reports. The federal government gives you the right to request one free credit report each year by visiting AnnualCreditReport.com.

2

Dispute the collection accounts with the credit bureaus reporting them. The FCRA allows you to dispute collection accounts that you do not recognize or that contain incorrect information. You can file your disputes by mail, by phone or online. Credit bureaus must resolve a consumer's dispute in 30 days or less. You need to file a dispute before you can insert a consumer statement in your credit report.

3

Write a statement no longer than 100 words explaining the circumstances surrounding your collection accounts.

4

Visit the website of each credit bureau and submit your consumer statement online. If you are not comfortable submitting your statement online, you can call the credit bureaus and file your consumer statement directly with a customer service representative, who will then add the statement to your credit report.

5

Explain the circumstances surrounding your diminished credit score to any business that you know plans to pull only your credit score. Your 100-word consumer statement is not visible to individuals and businesses that pull only your credit score rather than your full credit history.

6

Write a letter explaining your collection accounts and why future collection accounts will not occur. Submit this letter to any lender, creditor, landlord or employer you apply with, to place within your files. Thus, multiple individuals reviewing your credit report or scores and application history will read your letter and, you hope, take it into consideration when determining whether to approve your application.