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Article Directory :: Finance & Investment Articles
A collection on your credit report is a very serious mark and will cause your FICO score to drop. You can get a collection for an unpaid medical bill, credit card, personal loan… If you have a collection on your credit you should follow the following steps to challenge and remove this item.
1. Get all 3 of your credit reports - you will likely be surprised that all 3 will contain different information. Examine these reports and identify the collection marks and any other items that you believe are inaccurate.
2. Dispute the credit bureaus - you can do this yourself or you can hire a professional to do it on your behalf, but you will need to send a dispute to each credit bureau. In your dispute you must include the reason the item is incorrect such as: the dates are incorrect, the balance is wrong, it is not my account…
3. The bureaus will investigate - they will contact the collection agency and ask them to verify the account, the balance, and the dates on it. If the item is verified that it will remain on your credit report and you will have to work out a settlement with the collection agency. However if you account is not verified then by federal law it must be removed. It is estimated that over 80% of all bureau investigations result in the item not been verified and the negative mark being removed from your credit report.
4. Settlement offer - if your account is verified and then you need to settle with the collection agency. In exchange for your settlement payment you must get them to agree to stop reporting the negative information to the credit bureaus, that way after you make your payment you can dispute the item again and it will not be verified and the bureaus will remove it from your report.
During your negotiations with the collection agency you need to be aware that you should never pay the full balance due. This is because the collection agency purchased your debt for only a fraction of the total balance. There are reports of collection agencies paying just pennies on the dollar for debt accounts.
After you have made your settlement payment then you should dispute this item with the credit bureaus once again. When they investigate this time and contact the debt collector the account will not be verified as per your settlement agreement, and the bureaus will remove it from your credit history.
If you have a collection on your credit report this is causing you to pay higher interest rates and even get rejected for financing. In today's new lending atmosphere your credit score has never been more important. It is important to address a collection right away because many times debt collectors will follow up by filing a lawsuit against you. This could potentially result in a judgment placed on your credit report which is a very bad mark.
In sum, you don't just have to live with bad credit for 7 long years. Frequently once you get the bureaus to investigate you can get bad credit items including collections off of your credit report which will improve your payment history. Your payment history is roughly 40% of your overall credit score and in other words it is a very important piece of information.
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