Having an account in collections can damage your credit score without you even being aware of it. Unfortunately, it can be easy to simply ignore or forget about issues with your credit. Perhaps you closed a credit card account that still had a couple of charges pending, or maybe you weren’t able to keep up with loan payments.
If you’re wondering how to remove collections from your credit report in Canada, we may have some solutions.
Key Points You Should Know
- An account in collections will be noted on your credit report and will negatively affect your credit score.
- If the negative remark is not legitimate, you may be able to have it removed from your credit report.
- If you legitimately have an account in collections, you’ll either need to pay it off in full or wait until the appropriate amount of time has passed, when it will eventually drop off your report.
How To Remove A Collections Account From A Credit Report
Here are some tips to getting a collections account off of your credit report, depending on the situation:
1. Determine If The Account In Collections Is Legitimate
The first step to getting a collections account removed from your report is to see what you’re dealing with. It’s not uncommon to get a collections notice in the mail or receive a phone call and not know what the charge is all about. Getting a copy of your credit report can let you know who says you owe them money without a lot of stressful back-and-forth telephone conversations.
You can obtain a copy of your credit report for free from Equifax Canada and TransUnion Canada.
2. Challenge The Collection Agency, If Illegitimate
If you feel that the claim by the collection agency is invalid, you can challenge the charge and request that it be removed from your credit report.
The first step is to send the collection agency a debt validation letter, which should include the following information:
- The name and contact information of the original creditor
- A detailed accounting of the balance owed
- Proof that the statute of limitations in your province hasn’t expired
3. Negotiate To Have The Collections Note Removed, If Legitimate
You may want to send a goodwill letter to your lender to have the negative mark removed from your credit report. While this may not always work, it’s still worth a try. Your chances of this plan working may be higher if your payment history has otherwise been positive.
If the claim from the collection agency is valid, there are two main ways to mitigate the damage to your credit report:
- Pay off the debt in exchange for removal – You can request that the debt collection agency remove the entry from your report in exchange for paying off the debt in full. Collectors are not required to do this and their acceptance will depend on a number of factors, including the debt amount and your history with the account.
- Negotiate a lower price for removal – If you don’t have the full amount available to pay off your debt, you can try to negotiate with your collection agency. This is called a debt settlement, which you can hire a professional to help you with. You’ll ask to pay a smaller amount than you owe, and the collections agency can mark your debt as paid.
4. Wait For It To Fall Off Your Credit Reports
Information does not stay on your credit reports indefinitely, as there are specific timelines for different types of information. Both Equifax and TransUnion keep collections on credit reports for 6 years. If your debt is close to that age, it might be your best option to simply leave it there until it drops off.
5. Work With A Credit Repair Company
There are credit repair agencies that work on your behalf to remove negative information from your credit report — such as an account in collections — in exchange for a fee. They can also negotiate with credit bureaus to improve your credit score or guide you to loans that you may use to repay your debts.
It’s important to note, however, that credit repair agencies are not able to do anything that would not be possible for you to do on your own. For example, if the account in collections is legitimate, the credit repair company will not be able to have it removed. They’ll only be able to have it taken off your report if it’s there inaccurately.
Further, be wary of credit repair companies that guarantee to remove negative remarks or promise to boost your credit score. These firms make money from their fees and interest rates, which can be quite high.
How To Check Your Credit Reports For Collections
Checking your credit reports at least once a year should be a financial habit that all credit users have. You should have two credit reports, one from each credit reporting bureau: Equifax and TransUnion.
Both credit bureaus allow consumers to access their reports for free online or through mail. Once you receive your reports, you can review them for accounts in collections, which will have a rating of R9.
When reviewing these accounts, make sure you verify the following information:
- The amount owed
- The name of the lender or creditor
- The name of the debt collection agency (if indicated)
- How many payments you’re behind
Why Is My Account In Collections Not Showing Up On My Credit Report?
There can be multiple reasons why your account in collections is not showing up on your credit report. Below are some potential reasons:
- Past The Statute of Limitations – Accounts in collections disappear from your credit reports after 6 years.
- System Error – Sometimes technological errors or glitches can cause disturbances to your credit report. These are typically temporary and your collections account will likely reappear.
- It’s In Transition – If your debt was recently sold to a collection agency, it may be in the transitional period where the debt is being moved from the original creditor to the collection agency.
- It’s Paid Off – If you’ve paid off your collections account, the account will not disappear, but may look different. It should appear as “satisfied”.
Does Removing An Account In Collection Improve My Credit Score?
Whether the account in collection was removed because you disputed it with the credit bureau, negotiated with the creditor, or simply waited for it to fall off, your credit score should eventually improve.
Accounts in collection have a severe impact on your credit score while it remains on your credit report. But once the appropriate amount of time has passed and the note falls off your credit report, you should see your credit score improve gradually.
Bottom Line
If you missed multiple payments and your account is in collections for legitimate reasons, then you’re unlikely to be able to remove it from your credit report. However, you can always pay off the account in order to help mitigate the effect it may have on your credit. On the other hand, if your account has ended up in collections due to an error, be sure to have it rectified by filing a dispute with the credit bureaus.
