How Do You Fix Your Credit After Getting Sent to Collections?
Sometimes, no matter how much you try to do the right thing, you are still stuck between a rock and hard place. Whether it’s a hefty hospital bill, a credit card that got out of hand, or a balance that you weren’t even aware of, once a debt has been sent to collections, the damage compounds. You might be harassed by your lender or debt collectors. Your bank balance is likely to take a hit, as is your credit. While the first two are enough on the their own, the last one can be particularly problematic long-term, especially if you’re planning on purchasing a car or house in the next seven years. Your credit serves as a signal of trustworthiness, and if lenders see too low a number, then it can be difficult to accomplish certain financial milestones.
This process is complicated enough on its own, but adding in debt collections can make it even worse. However, you can reverse this situation with a little help.
Why You Can’t Just Pay Off The Balance
It might seem that this is the easy answer, but unfortunately this might not help your credit as much as you think it will. As long as the collections account is still listed on your credit report, it will still pull down your score overall, and getting the account removed can be difficult. Furthermore, if you legitimately aren’t responsible for this debt, whether due to identity theft or a misunderstanding, paying on the debt is a form of claiming it as your own. You will be held responsible for it after that point.
Although paying off the balance of the account is important in its own right, it won’t do much for your credit score in the short term. You’ll have to remove the collections account from your credit report, and that will require a lot of back and forth between your lender, debt collectors, and the credit bureaus. This is the sort of situation that most people don’t know how to navigate; it’s best left to a professional.
How Can a Credit Repair Company Help?
Credit repair companies have plenty of experience moving through the maze of credit negotiation, so even when your account has gone to collections, they know what to do. CreditRepair.com has a relationship with TransUnion, one of three main credit bureaus, giving them a step up when it comes to negotiation. Lexington Law, on the other hand, is run by actual lawyers that specialize in credit repair. There are laws surrounding debt collection, including what debt collectors are or are not allowed to do. Lexington Law will be able to tell you whether or not their behavior has risen to illegality, and what recourse that may open up for you. Considering that your credit report is now in the hands of several different agencies, you should press any possible advantage.
Additionally, credit repair companies might be able to offer you something special for cases involving debt collectors. They might offer special assistance with drafting goodwill letters, advising when you ought to claim the debt, or determining which debt is harming your credit the most. This can be especially helpful, given the complicated nature of debt.
- Your debt might be affecting more than just your own credit. The Credit Pros, for example, offer special rates for couples that are looking for credit repair, while Credit Repair.com will simply offer your spouse a discount. While your debt doesn’t always drag your spouse down too, that’s the sort of thing you should double-check.
- Medical debt and non-medical debt are counted differently when it comes to your credit score. It also matter the amount of debt, how long it has been in collections, whether you have unpaid late fees, etc. Get a professional’s advice on which debt should be tackled first.
- You might have more than one account in collections. Depending on how many items you have, you might be better suited for Lexington Law’s flat rates rather than The Credit Pros’ per item pricing. Any legitimate credit repair company will explain their services and your options before charging you anything, and you will always have the opportunity to cancel or change services should the need arise.
In order to have the best chance of removing collections from your credit, do not start paying down your debt without first consulting a credit repair company. It might be a better idea to dispute the debt altogether, or to minimize it through some form of consolidation. Either way, a credit repair company has the best shot of removing collections from your statement.
For more tips and guides to help you improve your credit score, visit the Fiscal Tiger credit score resource and learning center. Looking to deal with the credit bureaus yourself? Visit our dispute letter template resource center for writing tips and more information.
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Dayton is a chronic Wikipedia addict, which is detrimental to her social life but stellar for her writing. She resides in Boise, ID, surrounded by her own frantic outlines, highlighted encyclopedias, and potatoes. The latter was not by choice.
This post was updated May 4, 2018. It was originally published August 24, 2017.