Understanding Collections:
  • What Are They?
  • How They Affect Your Credit Score?
  • How To Remove Them?

At NovoMyCredit, we understand that navigating the world of credit can be complex and sometimes overwhelming. One area that often causes confusion and concern is collections. In this blog, we’ll break down what collections are, how they impact your credit score, and whether it’s possible to remove them from your credit report.

What Are Collections?

A collection account is created when you fail to pay a debt, such as a credit card bill, loan, or medical bill, on time. After a certain period of non-payment, typically 180 days, the original creditor may sell your debt to a collection agency. The collection agency then takes over the task of collecting the debt from you.

How Do Collections Affect Your Credit Score?

When a debt goes to collections, it indicates serious delinquency and can cause a substantial drop in your credit score. The exact impact depends on your credit history and the scoring model used, but it can be as much as 100 points or more.

 

Collections remain on your credit report for seven years from the date of the original delinquency, even if you pay off the debt. This can make it harder to get approved for new credit, as lenders see it as a red flag.

 

Having a collection on your credit report can lead to higher interest rates or even rejections for new credit applications, including credit cards, auto loans, and mortgages

Steps to Handle Collections:

Regularly check your credit report for any inaccuracies. You’re entitled to a free report from each of the three major credit bureaus (Experian, Equifax, and TransUnion) once a year through AnnualCreditReport.com.

 

• Challenge the Collection: If you believe the collection account is inaccurate, you can challenge it with the credit bureaus. This process involves sending a letter explaining why the account is incorrect and providing any supporting documentation. At NovoMyCredit, we go beyond the traditional dispute process to ensure the best possible outcome for our clients.

 

• Avoid Contacting Collection Agencies Directly: Communicating with collection agencies can inadvertently reset the date of last activity on the account, potentially prolonging the negative impact on your credit report. 

 

Seek Professional Help: If the process seems overwhelming, consider seeking help from a credit counseling service or a credit repair company like NovoMyCredit. Our professionals can guide you through the process, challenge inaccuracies on your behalf, and help you improve your credit score.

 

Dealing with collections can be stressful, but understanding what they are and how they affect your credit score is the first step toward managing them. While collections can significantly impact your credit, there are strategies to mitigate the damage and potentially remove them from your credit report. At NovoMyCredit, we’re here to help you navigate these challenges and work towards a healthier credit future. Contact us today for personalized credit repair assistance and take control of your financial health.

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