Having a collection account listed on your credit report is always a bad thing. Even an isolated collection listing can lower your credit score far enough that you won't be able to get approved for the best interest rate on loans which can end up costing you a significant chunk of change. That lone collection account which may have been for only a hundred dollars or so could amount to many thousands of dollars in higher interest rates and higher car insurance premiums because of the impact it has on your credit rating. For this reason, before applying for a new home loan or other type of credit, it is advisable to try getting collections accounts deleted from your credit reports.
If you have only a few paid collections on your credit reports that are of a relatively small value, you'll want to start by sending the collections agencies a goodwill letter. Goodwill letters are you asking the collections agency nicely to stop reporting the collection account to the credit bureaus. And while this may seem like a hopeless attempt, goodwill letters have proven to be surprisingly effective as long as you don't have a large number of accounts that have been sent to collections.
When composing a goodwill letter, the goal is to humanize yourself and make the person on the receiving end of the letter sympathize with your predicament. A sample goodwill letter to a collections agency might read as follows.
"Dear Sir / Madam,
Last fall I received a parking ticket during finals week at my college because I was running late and had to take the first spot I could find. In the confusion of finals week, the holiday break, and the start of a new semester, I neglected to pay the fine and it was sent to your collections agency. As soon as I received notice from you, I paid the amount in full.
My husband and I recently began shopping for a new home and are finding that the negative listing on my credit report is hurting our ability to get approved for some financing. I'm writing to ask if you would kindly remove the collection listing from my credit report.
Sometimes it is as easy as that: a short, simple, non-accusatory letter written in a friendly tone. If the letter does its job, your credit reports look that much better and your credit score may see a big jump. If not, worst case scenario you are out the time it took to write the letter and the cost of first class postage.
One thing to remember is to make sure you do not try to use this method to remove any unpaid collection accounts. Not only will it not work, but it could make matters much worse for you. This seems like a common sense rule, but it is something people sometimes do not think about, especially if they are enlisting the help of a credit repair service to help clean up their credit reports.
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