What to Do When Collections Show up on Your Credit Report

Congratulations on taking the first step towards building your credit score by checking it! You’ll probably see lots of different things on your report, even things that could’ve fallen into collections. Did you know that roughly one-third of Canadians have debt that’s in collections? This blog will discuss what to do when collections show up on your credit report.

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How Do Debt Collection Agencies Work?

A collection agency is a company that takes over the job of recovering any owed funds on behalf of your creditor. The lender that you owe will either pay a collections agency to collect the money for them, or they will sell your debt to the agency. Unfortunately for you, the job of the collection agency is to hound you for the money you owe. They are relentless and not likely to give up anytime soon.

When one of your accounts goes into collections, it will appear on your credit report and have a very negative impact on your credit score. Like an anchor attached to a kite, collections debt will drag your score down fast. Even if everything else on your report is perfect, one account in collections is enough to drag everything down to the gutter.

How To Get Collections Off Your Credit Report

So, what do you do if you notice an account in collections on your credit report? How can you reverse what it’s done to your credit score and work towards building your credit? We explain in the following four steps containing ways to build credit.

1. Dispute false claims

Identify theft or even clerical errors can sometimes cause a false claim on your report and it happens more often than people think. It’s actually one of the top reasons you should obtain a copy of your credit report and familiarize yourself with what’s on it. It can be a super simple route to build credit.

If you see a false claim, you need to file a dispute with the credit bureau and should consider contacting the lender reporting the claim. If you can prove that the claim is inaccurate, you can have it removed from your report with the damage reversed and reflected in your credit score.

2. Negotiate with the collection agency

Collection agencies will usually agree to varying payment terms which means that if you can find a way to satisfy them quickly, they’re unlikely to continue reporting the debt to the credit bureau. This can help improve your credit score fairly quickly.

3. Goodwill deletions

Although quite rare, a collections agency will sometimes remove debt from your credit report if you can explain the circumstances that led to the situation. In a nutshell, you're reasoning with the agency, and sometimes they show good faith.

4. Pay off the remaining debt

The best way to ensure that your debt is eliminated is to pay it off entirely. The account in collections will be on your report for up to six years, but the sooner you clear it, the better.

Once you’ve successfully had the collections account removed from your credit report, you should begin the process of rebuilding your credit score. Credit building programs are one of the best ways to build credit. Click here to find a credit building program that suits your needs.

Have you ever had to dispute a false claim on your credit report? How did you deal with it? Let us know in the comments!