I did a radio interview on 1330 AM in Tucson, AZ; one of the callers had a question I hear a lot: "What do I do if a collection I have paid is still reporting as past due"? First of all it is important for anyone who pays a collection to realize the collection agency isn't necessarily going to go back and update the account on your credit report. Unlike a credit card, auto loan, student loan, or mortgage, a collection does not get reported monthly in the majority of cases.
For the most part a collection is placed one time initially, sort of as bait, to get the consumer to contact the collector about the account. I would say in most cases, probably 9 out of 10 times, the collection is never updated after payment is made. I have witnessed this time and time again.
The way a paid collection should reflect on the credit report is "Paid in Full" or "Settled for Less Than Amount Owed", depending on if full payment was made or a lesser amount was negotiated. Regardless it should show a $0 amount for:
•· The balance
•· The past due amount
•· The payment
Paying a collection will not remove it from the report, unless you are able to negotiate that with the collector. You would need to take that up with the collection agency directly. It does need to accurately reflect it is no longer owed. The collection will come off the report completely once seven years has passed from when it was originally reported. Since the collections are often time not updated, it is important for the consumer to check the report a month or two after making payment to see how the account is being reported. If it has not been updated it is best to dispute directly with the credit bureaus via mail. I suggest paying all collections with a check so you have documentation payment was made and received, order a copy of the cancelled check from your bank. Below is a sample letter with the addresses to the three credit bureaus, it is a good idea to include a copy of documentation reflecting the account as being paid (i.e. a copy of the cancelled check or in the case a bankruptcy a copy of the discharge and schedule of creditors).
Disputing is free by mail, the credit bureau has 30 days to investigate your claim and get back to you with the results. If you feel the credit bureau is not properly investigating your claim, or the creditor is trying to extort you for more money, file a complaint with the Federal Trade Commission. The FTC enforces the Fair Credit Reporting Act; the Act gives us our right to dispute incorrect information on our credit report.
December 29, 2008
XYZ Credit Bureau
100 Credit Drive
Hometown, PA 00000
Re: Credit Record Problem
To Whom It May Concern:
I recently reviewed a copy of the credit file your company is maintaining on me. While doing this, I identified the following problems: (At this point in your letter, you need to clearly describe each problem in as few words as possible.)
I have enclosed the following documentation that supports my claim: (Itemize the documentation that you are enclosing.)
Please investigate this problem as quickly as possible, correct it, and provide me with a corrected copy of my credit report. Please send this copy to:
Jane A. Doe
15 River Drive
Hometown, PA 00000
I can be reached by phone at (000) 000-0000. Thank you for your prompt attention to this matter.
Sincerely,
Jane A. Doe
Full Name:
Social Security Number:
Date of Birth:
Current Address:
Previous Address:
Contacting the Credit Bureaus
Equifax
http://www.equifax.com (You can dispute online, however, they may require you to purchase a new report through their site)
P.O. Box 740241
Atlanta, GA 30374-0241
(800) 685-1111
TransUnion
http://www.tuc.com (You can dispute online, however, they may require you to purchase a new report through their site)
P.O. Box 2000
Chester, PA 19022
Experian
http://www.experian.com (You can dispute online, however, they may require you to purchase a new report through their site)
P.O. Box 2002
Allen, TX 75013
(888) 397-3742
Or look on your credit report under ‘Consumer Referral Information' for contact information of reporting agencies.
Patrick Ritchie is the author of The Credit Road Map, which is available on Amazon.com, REALTOR.org and TheCreditRoadMap.com. He is a Real Estate Finance instructor in Phoenix, Arizona.
Comments(3)