How to Remove a Collection Item From a Credit Report

Collection items on your credit report, especially recent ones, lower your credit score, according to FICO, the dominant credit score company. Credit cards, banks and other lenders frequently charge off accounts when you do not make payments for at least six months, MSN Money writer Liz Pulliam Weston advises. The debt may then be sold to aggressive collectors at a big discount. They earn a profit if they get all or most of the amount due from you. Paying them does not automatically get the item off your credit report. You must negotiate that ahead of time.

• 1

  Calculate what you can afford to pay as a lump sum settlement for the collection item. Collection agencies try to get you to pay the entire amount, but they will usually negotiate because they still make a profit due to buying the account at a discount. You have more leverage if you are willing to make one large payment rather than splitting it over several weeks or months.

• 2

  Call the collection agency at the end of the month. Many agents work on commission, according to the Bankrate consumer finance website, so they are often more likely to cut you a favorable deal in the month's final days.

• 3

  Offer a lower settlement amount than you are prepared to pay, Bankrate recommends. The collector will probably make a counteroffer, so you have to leave some bargaining room.

• 4

  Tell the collection agency you want the item wiped off your credit reports with Experian, Equifax and TransUnion after you send in your payment. The agency might offer to change the status to "paid as agreed," but Bankrate Debt Adviser columnist Steve Bucci warns that this still hurts you because lenders will see you had a seriously delinquent account. Insist on total erasure before you agree to pay any money.

• 5

  Ask for a written copy of the agreement prior to remitting your payment, Bankrate advises. The collection agency might not follow through if you do not have proof of its promises. As an alternative, you can write a letter summarizing the conversation and agreement and sending it to the agency through certified mail. Do not send payment until you get a receipt proving your letter was delivered.

• 6

  Confirm that the item was removed by ordering your credit reports after you pay the bill. The Federal Trade Commission states that you can request free reports annually from annualcreditreport.com.