How Hard Is It To Remove A Collections Bill From Your Credit Report?

Q. “My daughter was divorced last year. Her ex-husband was supposed to remove her from the cellphone account after the divorce, but we just discovered on her credit report that he did not remove her and has let the account go into collections. Is there any way to have that collection removed from her credit report?”

A. Unwinding finances after a divorce can be tricky. But there are options for removing these kinds of blemishes from your credit report – or at least for minimizing the impact they have on your ability to qualify for a loan, an apartment or other situations where your credit history is a factor.

In the reader’s scenario, the bill is already so late it has been sent to collections. But for people who are trying to avoid this kind of scar on their credit reports, the first step would be to have their names removed from any joint accounts as they prepare for the divorce or after the divorce is finalized, said Ken Chaplin, senior vice president for credit reporting agency TransUnion.

One or both spouses can contact the company about updating the account. Some creditors may be willing to remove your name from an account after seeing a copy of the divorce agreement, he said.

If both names stay on the account, both people’s credit scores can suffer if the account becomes delinquent. That is because the creditor would hold both people responsible for making payments and the late payment would be recorded on both people’s credit reports. Payment history is the No. 1 factor that goes into determining a person’s FICO score, so having a late payment on your credit report or a delinquent account can ding your score.

However, you may be able to have the late-payment mark removed from your credit report if you call the creditor and work out a payment plan, Chaplin said. Some creditors may also agree to remove the collections from the credit report after they receive payment, he said.

While there is no guarantee that any record of the collections incident would be cleared from the report, consumers can explain to the collection agencies whether there was a dispute with the creditor or a miscommunication that led to the bill staying unpaid. Credit reports are generally updated every 30 days, so consumers can check their reports the next month to see whether the bill has been removed from the report, Chaplin said. (Of course, paying the bill in full may not be appealing if it relates to a cost that was supposed to be split with an ex-spouse. But if the amount in question is small, it can be a quicker option for resolving the debt.)

If the bill cannot be removed from the credit report, there is still hope for those looking to qualify for a loan. People with otherwise strong credit and positive payment histories may find it helpful to write a letter to the lender explaining the delinquent account so that the bank doesn’t use that as a reason for rejecting the application, Chaplin said.

In the letter, borrowers can explain how their situation has improved and point to the other positive aspects of their credit history. “It will give you the chance to talk about who you are,” he said.

Lastly, it’s important to note that negative credit events, such as bills that are sent to collections, don’t stay on a person’s credit report forever. They are removed from a credit report after seven years. And as time passes, the credit event will matter less for credit scoring and for lending decisions, Chaplin said.