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How to Erase Debt on Your Credit Report in Under a Year

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When was the last time you took a look at your credit report? If you’re thinking about applying for a mortgage, car loan, or credit card facility, then the lender will view your credit report before they approve your facility.

If your credit score in the 500s, then the chances of your getting approved are slim. Even if the lender does approve the facility, chances are it comes with unfavorable terms, such as a high-interest rate.

Many of us never look at our credit report, and we wonder why we get turned down for a personal loan or credit card.

So, how do you check your credit score, and how do you repair bad credit? This process is not as challenging as it sounds.

How to Check Your Credit Report

There are three main credit bureaus in the United States; TransUnion, Equifax, and Equestrian. These bureaus collect data from credit agencies to determine your credit score. If you want to remain in good stead with lenders and receive the best rates on your loans, then you’ll need a credit score over 700.

The credit bureaus allow you to check your credit score once a year for free. All you need to do is request your report on their website, and it’s available for download in a few seconds.

Your credit report shows outstanding accounts, as well as collections or judgments filed by creditors. Americans should check their credit score at least once a year to look for any mistakes or discrepancies.

If you don’t ever view your credit report, then now is a good time to start. Log on to a bureau, and check it as soon as possible.

It’s a common occurrence for people to find that they have collections on their credit report for debts they didn’t even realize they owe. However, ignorance is no excuse.

Although you may not have known that you had a mark on your credit report, that doesn’t stop lenders from viewing it as a blemish against your name.

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Read: 5 Ways to Easily Check Your Credit Score for Free

Collections and Judgments

It’s reasonably common for people who are viewing their credit report to notice they have collections from various creditors. A collection notice occurs when a creditor does not receive payment for money, products, services, or credit loaned or issued to you.

If you fail to repay the creditor, then they issue a collection with an agency to recover the debt. In many cases, your creditors will sell the outstanding debt to a collections agency that specializes in recovering outstanding debts from the consumer market. This debt is then resold from agency to agency, in the hopes that you will pay back the money you owe.

However, in many cases, the collector will not attempt to contact you about the outstanding monies. Instead, they prefer to issue a collection notice against you on your credit report, in the hope that you pick it up, and make the payment to settle the debt.

One of the most common examples of collections you may not be aware of comes in the form of unpaid medical bills. In many cases, the healthcare provider may run into an issue with your insurance, where your insurance refuses to pay the full outstanding amount.

As a result, the healthcare provider goes after you to recover the funds and not the insurer. This sad reality happens to more people than you can imagine.

If you’ve loaned money from financial institutions in the past and failed to pay them back, then you may have a judgment on your credit report. Collections and judgments are detrimental to the health of your creditworthiness, and no lender will take a risk on loaning you funds if you have a history of non-payment that led to a judgment filed against you.

Collections and judgments can prevent you from attaining car finance, insurance, or a lease agreement on an apartment. Therefore, it’s vital that you view your credit report for any judgments or collections, and take the appropriate actions to clear your credit report of these issues.

Read: How to Repair a Bad Credit Score: Complete Guide

How Collections Work

To understand how to get rid of these notices, it’s vital that you know how they get on your report in the first place.

When you default on a payment, it doesn’t go to the collections department on the first day after the payment is due. In most cases, creditors will wait for anywhere between 60 to 180-days before sending your debt to their collections department.

Private companies and financial institutions have in-house collection departments that pursue outstanding debts during this time. However, if your contact information changes or you block the number on your cellphone, then it’s challenging for them to get hold of you and notify you about your outstanding account.

If the company or institution can’t get hold of you, then they typically write off the debt after 6-months and no longer attempt contacting you for the outstanding funds.

However, if the company or institution writes off the debt, it doesn’t mean that they let you off the hook. Writing off the debt means that the creditor removes your outstanding debt from their books. Companies do this to make their annual financial statements look better to investors and shareholders. No investor will want to put their money into a business that has significant amounts of outstanding debt.

In some cases, lenders may have insurance against any defaults. This strategy allows them to recover a partial amount of the money you owe from an insurer.

After the write-off, the company typically sells the debt to a collection agency, along with all of your personal information. It is now the responsibility of the collector to start the procedure of filing against you. The collection agency gets in touch with the credit bureau, who then issues a collection notice on your credit report.

The debt collection agency will make numerous attempts to contact you, in the hope that they can intimidate you into paying off the money you owe. Some collection agencies can be very self-righteous and demanding, to the extent that its borderline harassment on their part.

However, if they cannot get hold of you, or you still refuse to pay, then the collection agency may sell the debt to another collection agency, and the cycle begins again.

Each time the agency sells your debt, the amount owed typically reduces, until it becomes an insignificant amount, and the company writes off the debt, and you won’t experience any more threatening phone calls asking you to repay the money.

However, the non-payment collection notice will remain on your credit report, until you either query the validity of the collection with the credit bureau or contact the debt collector to arrange payment.

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Read: How to Get Your Credit Score to 800 or Higher

How Judgments Work

If you have a judgment against your name on your credit report, it’s a far more severe case to handle. A judgment occurs when a creditor wins a lawsuit against you in court, proving that you owe them money. Judgments may come from landlords where you absconded from the terms of your lease, or it may occur from you failing to pay your mortgage, and the lender goes after you in court to force you to pay the outstanding amount after foreclosing on your home.

In most cases, judgments occur after a collection notice is still outstanding for a given amount of time, depending on the policies and procedures in place by the creditor concerning collections. Judgements are typically for large amounts of money, if you owe a few hundred dollars to a creditor, you can expect that they won’t file a judgment against you for this amount.

The reason why not all collections reach the judgment phase is due to the high legal costs involved in filing a judgment. Creditors need to hire a lawyer and pay for the court appearance, along with other legal fees surrounding the paperwork and consulting required to finalize the judgment proceedings. It’s for this reason that most creditors won’t file judgment for amounts under $500.

The creditor presents their case to a judge in court, and the court decides on whether or not to issue a judgment against you. Creditors are obliged to notify you of a court date in which you have to appear to defend your side of the case. In most cases, the debtor does not show up to the court date, and the judge rules in favor of the creditor, making you liable for the outstanding amount.

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Steps to Remove Judgments and Collections from your Credit Report

It’s a tedious process to remove collections from your credit report, but when they are gone, it’s a rewarding feeling. Follow these steps to remove collections from your credit report.

Review Your Credit Report and Check for Mistakes

The first step in removing collection notices from your credit report is to collect all of the information on the collection notice. Log on to a credit bureau and download a copy of your credit report.

The collection notice will have all of the relevant information on your outstanding debt owed. If you can manage to find the original invoice, then you can cross-reference this information to ensure that it’s correct.

Should the information differ, then you have the right to protest the collection notice with the Fair Debt Collection Practices Act. If not, then carry on with the rest of the procedure outlined below.

Ask the Creditor for Proof of the Debt

If a debt collector contacts you concerning the outstanding account, then you have the right to ask them for proof of the debt. The collector needs to provide you with relevant documentation of the amount owed.

If they fail to provide this information, you have cause to ask for dismissal and removal of the collection notice from your credit profile, as per guidelines set by the Fair Debt Collection Practices Act.

The FDCPA provides consumers with the right to have the information surrounding the debt issued to you within 5-working days from the date of issue of your request.

The Paperwork

The debt collector must be able to prove the following for the debt to be considered valid.

The debt collector must issue verification of the debt or a copy of the judgment against you within 30 days. This verification must include the address and name of the original creditor.

If someone contacts you about a debt you owe, then it’s a prudent strategy to secure the proof of the debt before taking any action.

If the debt collector cannot produce the original documentation, then they cannot validate the debt, and you will have a far easier time removing the collection notice or judgment from your credit report in the dispute phase.

File a Dispute with The Credit Bureau

After gathering the relevant information regarding your collection or judgment, you’re ready to dispute the filing with the credit bureau. You’ll need to file each dispute individually with the credit bureaus, and you can do this online, without physically visiting the bureau’s offices.

The bureau may ask you to send them a copy of the bill dispute, as well as the details of the inaccuracies involved in the credit report. They may also ask you to submit supporting documents to serve as evidence in your case as well.

Determine the Statute of Limitations on Your Debt

Depending on the state in which you reside, the creditor has a limited time frame to execute on the option to sue you for collection of the funds. However, even if the creditor does not take the opportunity to sue, the collection notice remains on your credit report.

Make Arrangements to Pay

If you file a dispute with the credit bureau, and if the creditor does not reply to the bureau’s request for information within 30-days, you have the right to ask then bureau to remove the collection notice from your credit report.

Many creditors ignore these requests from the bureau, and there is a good chance that they won’t pursue the matter. This lack of follow-up on their part plays to your advantage, and you may get the collection or judgment removed from your credit report, even if you still owe the creditor the money.

If the creditor does respond to the bureau’s request, then you can make arrangements to pay the balance. After paying off the amount in full, you can apply to the bureau for removal of the collection notice from your credit report.

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Oliver Dale is Editor-in-Chief of MoneyCheck and founder of Kooc Media Ltd, A UK-Based Online Publishing company. A Technology Entrepreneur with over 15 years of professional experience in Investing and UK Business.His writing has been quoted by Nasdaq, Dow Jones, Investopedia, The New Yorker, Forbes, Techcrunch & More.He built Money Check to bring the highest level of education about personal finance to the general public with clear and unbiased reporting.oliver@moneycheck.com


Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank or credit card issuer and have not been reviewed, approved or otherwise endorsed by any of these entities.


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