Remove Collection Account Without Hurting Your Credit Score

Remove Collection Account Without Hurting Your Credit Score

Written by Caitlin Wood
Last Updated June 2, 2021

Your credit score is your key to loans and low-interest rates. If your score is too low, you’ll end up paying more for a loan than you need to or even be denied credit altogether. Your credit score is determined by a combination of factors, including how often you pay your bills on time, how much credit you have at your disposal, how much of that credit you are currently using, and how many recent inquiries there have been about your credit history.

A single incident, like an errant collections account, can do damage to your score without you even being aware of it. Unfortunately, this happens all too often as it is very 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 had a medical procedure that wasn’t covered under your health plan and are unable to pay for it. Collection accounts are a reality for a lot of individuals. What matters is how you deal with them, and that’s what sets the responsible consumers apart from the others.

How to Remove a Collection Account from your Credit Report

Getting a collection account off of your credit report may sound like an insurmountable problem, but it can be done. Below are a few tips:

1. Pull a Copy of Your Credit Report.

The first step to getting a collections account removed from your report is to see what you’re dealing with (click here for more information on how long information stays on your credit report). It’s not uncommon to get a collection 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 by mail from Equifax Canada and/or TransUnion Canada. There’s also an option to view your report online, but the agencies charge a fee for this service. (Checking your report once a year is a good habit. As many as five percent of Canadian consumers have errors on their reports that could cost them money or result in rejected loan applications in the future.)

2. Challenge the Collection Agency

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. This doesn’t have to be fancy. Basically, you want to ask the collection company for the following information:

– The name and contact information of the original creditor
– A detailed accounting of the balance owned
– Proof that the statute of limitations in your province hasn’t expired

3. Follow-up

After you’ve sent the first letter, you want to follow up with a second letter, send one to each of the credit reporting companies, disputing the charge. Since creditors are prohibited from commenting on accounts pending verification (your first letter), they won’t be able to provide the credit reporting companies with the information they need to validate the charge and it will be removed from your report.

For a more in-depth look at the debt collection process in Canada, check out this article

What if I decide the charge is valid?

Now, even if you feel the claim by the collections agency is valid after reviewing it and you realize that the charge is something that you owe, there are still ways to mitigate the damage to your credit report. However, once you ascertain that the charge is valid, you’ll want to negotiate a payment to the agency. Once it has been cleared, it’s unlikely that the agency will resubmit the charge to the reporting companies.

My account is in collections but it’s not showing up on my credit report. Now what?

If the charge in question doesn’t appear on the credit report it is possible that the charge in question has not been reported to either of the credit reporting companies. This actually is good news, because you don’t have to work to get it removed. If you feel the charge is valid, pay the charge. Sometimes collection agencies will settle for less than the stated amount; if never hurts to ask. Make sure to keep copies of all correspondence. If the charge isn’t on your credit report and you believe it to be false, don’t ignore it. It might still make it on your report if you do nothing. Instead, write to the collection agency and dispute the charge. Offer as much documentation as you have to strengthen your case. Send your correspondence via certified mail so that you have proof the agency received your letter.

Just because a collection agency says you owe them money doesn’t necessarily mean their claim is valid. However, how you deal with their claim will likely affect your ability to get credit at the best rates in the future. It pays to be proactive.

Rating of 3/5 based on 19 votes.

Caitlin is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over eight years. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security. One of the main ways she’s built good financial habits is by budgeting and tracking her spending through the YNAB budgeting app. She also automates her savings so she never forgets to put aside a portion of her income into her TFSA. She believes investing and passive income is key to earning financial freedom. She also uses her Aeroplan TD credit card to collect Aeroplan points so that she can save money when she travels.

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