Learn How To Remove Collections From Your Credit Report In Canada
Many of us face unfortunate situations in our lives that prevent us from being able to pay all of our bills on time—job loss, divorce, etc. When these things happen, it causes stress for many reasons and it’s completely normal for Canadians to worry about the impact that late or missed payments will have on their credit score
Collections on your credit history can hurt your credit score, making it more difficult to qualify for a car loan. The good news is that you can remove them— it is a fairly common problem Canadians face. In this article, we explain how you can go about removing collections from your credit report altogether.
Below, learn how to remove collections from credit reports in Canada:
IN THIS POST, WE COVER:
- What collections are and how they affect your credit
- How to check your credit report for collections
- How to remove collections from credit report in Canada
- Tips to help manage credit going forward
Your credit report and score are an important part of your financial life. When collection items land on your credit history it can cause your score to drop, making it harder to get approved for car loans or other types of credit. You might be wondering how to remove collections from credit reports and whether that could help your score. There are some steps you can take to minimize the impact of collections on a credit report. If you’re successful, this could make it easier to qualify for a car loan and/or get a better rate when you borrow.
KEY TAKEAWAYS
- In terms of your credit score, debt collections can knock off substantial points.
- You can check your credit report for collections through Equifax, TransUnion or a third-party service.
- There are steps to removing collections from your credit report, but it isn’t guaranteed.
- You can manage and improve your credit moving forward by paying bills on time, keeping balances low, etc.
HOW COLLECTION ENTRIES AFFECT CREDIT SCORES
When you take out a loan, credit card or other debt, you probably don’t anticipate not being able to pay it back. If you fall behind on your payments for a debt, including medical bills, your creditor can turn your account over to its collections department or assign it to a collection agency. The timing depends on the creditor; some may report your account to collections when you’re 30 days past due while others may give you 60, 90 or even 180 days to get caught up before your account goes to collections.
Once an account is in collections, debt collectors can contact you to try to get you to pay what’s owed. You’ll typically receive a written notice referencing your account number and creditor’s name, the amount you owe and how many payments you’re behind. Debt collectors can also call you to ask for payment, although you can ask that they only contact you in writing.
The types of debts that can end up in collections may include:
- Unpaid credit card bills
- Personal loans
- Student loans
- Car loans
- Tax debts
- Business loans
- Medical debts
In terms of your credit score, debt collections can knock off substantial points. Negative account information, including late or missed payments and collections, can stay on your Canadian credit reports for up to six years. If a debt collector sues you and gets a judgment against you to force you to pay, that can stay on your credit report for up to 10 years, depending on which province you reside in.
Lower credit scores associated with collection accounts can make it more challenging to get approved for new credit. Lenders may see you as high-risk and deny your application. Or, you might get approved but pay the highest interest rates. This makes borrowing money more expensive over time.
How to check your credit report for collections
Checking your credit reports regularly can help you determine whether you have any collection accounts that might be hurting your score. You can request a free copy of your Canadian credit report from Equifax Canada and TransUnion Canada in writing. If you don’t have time to wait for your credit reports to be mailed out, you can purchase a copy of your credit reports from either bureau online.
Keep in mind that your credit reports and credit scores are two different things. The information in your Canada credit report is used to calculate your credit scores. If you’d also like to see your scores, you can request them separately from each credit bureau for a fee.
Once you have copies of your Equifax and TransUnion credit reports, review them carefully. Look for any collection accounts and if you find them, make a note of:
- Who the debt is owed to
- The name of the collection agency, if there is one
- How much is owed
- How many payments the account is behind
Also, make sure you have the right contact information for debt collectors, which you’ll need for the next step. Again, some creditors will route past due accounts to their in-house collections department while others will assign or sell past due accounts to a collection agency. You need to know who to contact if you want to remove collections from your credit report in Canada.
How to remove collections from a credit report Canada
Note that the tips included here assume that a collections account assigned to you is accurate. If you find a collection account on your Canadian credit report that isn’t yours or that has incorrect information, you’ll want to dispute it with the credit bureaus that are reporting the information before doing anything else.
If you want to remove collections from your credit report in Canada, follow these steps:
Review Your Credit Report
It’s important to be familiar with your credit report. Review it at least once a year by requesting a copy from Equifax, TransUnion, or a third-party service such as Credit Karma. Look over the report and keep an eye out for any collection entries.
Verify The Collection Details
Next, make sure to verify the collection’s entry’s date and the name of the collection agency. Once you’ve noted this information, you can decide whether to have the collections entry completely removed from your report—unless the collections entry has expired or has been paid.
Wait For The Collection Entries To Expire
Collection entries in Canada (paid or unpaid) stay on your credit report for around six years. A collections entry is considered expired once six years have passed and should come off of your credit report automatically. Make sure to check if any of the collection entries are expired and removed when they were supposed to be. If any expired entries haven’t been removed, you can file a dispute with the credit reporting agencies.
Negotiate A Settlement For The Debt With The Creditor
If a debt collector isn’t willing to agree to pay for deletion or you can’t pay the debt in full, you might consider a debt settlement. This means the debt collector agrees to let you pay less than what’s owed to resolve the account. This won’t necessarily remove a collections account from a credit report but it will show a Paid status, which could help your score. If you’re settling a debt, remember to keep a paper trail showing when it was paid and get a letter from the collection agency acknowledging that the account has been satisfied.
Request To Pay For Deletion
Paying for deletion is essentially an agreement in which you ask the debt collector to remove a collection account from your credit report in exchange for payment. Whether it agrees to this usually depends on how old the debt is, how much is owed, and your past account history. Keep in mind that if you’re asking to pay for deletion, it’s with the expectation that you’ll pay the full amount owed including the original balance, interest, and any fees charged by the collection agency.
Wait It Out
If a debt is close to its statute of limitations or it’s an older debt that’s been on your credit report for several years, time may be your best tool. If you have a debt that’s almost at the six-year mark for reporting, for instance, you might just wait to let the account drop off your credit report. Whether it makes sense to wait depends on whether you have a pressing credit need, such as getting a car loan or buying a home, that would require you to clean up any old collection accounts first.
All of these are steps you can take on your own to improve your credit history. But if you don’t feel comfortable talking to your creditors, you might want to consider hiring a credit repair agency to handle collection accounts. Credit repair agencies can help you negotiate with creditors to resolve collection accounts, usually for a fee.
While there are plenty of reputable credit repair companies in Canada, there are also ones that try to scam unsuspecting consumers. Before agreeing to work with any Canadian credit repair company, do some research first. Check its credentials, business history, and reputation, as well as review the fees. If any credit repair company asks for a fee before it lifts a finger to help you, that’s a big red flag that it might be a scam.
If you’re looking for some extra support, you may want to consider credit counselling. What is credit counselling? We’ll walk you through what it is, how it works, and how it affects your credit. We’re here to help you rebuild your credit and take control of your finances.
HOW LONG IT TAKES FOR COLLECTIONS TO BE REMOVED
As was mentioned above, collection entries in Canada will stay on your credit report for six years from the date of the first delinquency. This means that if you are unable to make payments on a debt, it will remain on your credit report for six years no matter what.
But this does not mean you can’t have entries removed sooner. If you were making regular payments before your debt was in collections, you might be able to ask the collection agency to have the collections entry removed from your credit report.
For this to happen, you will likely need to share proof of the on-time payments. It would then decide to contact the credit bureaus to remove the entries or not. Remember that collection agencies have no obligation to remove any entries, so if one does agree to do so, ask it to send you a formal confirmation just in case.
Tips to manage credit going forward
If you’re successful in removing collection accounts from your Canada credit report, the next step is working on improving your credit. You can do that by:
- Paying all of your bills on time each month.
- Keeping your balances on credit cards low, relative to your card limit.
- Leaving older credit accounts open.
- Using a mix of different types of credit.
- Only applying for new credit when you truly need it.
Raising your credit score after having a collections account removed can take time. But with patience and the adoption of good credit habits like these, you can begin to see your score grow. That can pay off down the road when you’re ready to borrow for your next major purchase.
At Birchwood Credit, we understand that perfect credit can sometimes be difficult to achieve when you have a past collections history. We work with buyers from virtually every credit background to help find financing solutions to fit your needs and budget. Browse our extensive inventory online today to find your next vehicle. If you’re ready to learn more about what types of financing you qualify for, you can start by completing our online loan application.
