Unfortunately, missed payments can eventually lead to your account being sent to a collection agency, resulting in a collection account appearing on your credit report. This can impact your credit score and make it harder to qualify for loans, mortgages, or other forms of credit.
If you’re wondering how to remove collections from your credit report in Canada, you’re not alone. At Spergel, we regularly help Canadians understand their credit reports, deal with collection agencies, and create a plan to improve their financial situation.
In this guide, we’ll explain how collections affect your credit score, whether collection accounts can be removed, and what steps you can take to rebuild your credit.
What is a collection account?
A collection account appears on your credit report when a creditor believes a debt is unlikely to be repaid and transfers or sells the account to a collection agency.
Collection accounts can arise from many types of debt, including:
- Credit cards
- Personal loans
- Lines of credit
- Utility bills
- Cell phone contracts
- Auto loans
- Unpaid medical expenses
- Mortgage shortfalls
Once an account enters collections, it is typically reported to Canada’s major credit bureaus, Equifax and TransUnion.
How does a collection entry affect your credit score?
A collection account is considered a serious negative item on your credit report.
Having an account in collections may:
- Lower your credit score
- Make it more difficult to qualify for new credit
- Impact mortgage approvals
- Result in higher interest rates from lenders
- Raise concerns for landlords or other organizations that review credit reports
While the impact lessens over time, collection accounts can continue affecting your ability to borrow money for several years.
Can you remove collections from your credit report in Canada?
The answer depends on the circumstances.
You may be able to remove a collection account if:
- The information is incorrect
- The debt does not belong to you
- The account is being reported inaccurately
- The collection entry should have already been removed
- The credit bureau determines the information cannot be verified
If, however, the collection account is accurate, it may remain on your credit report for the period allowed by the credit bureau’s reporting rules.
Step 1: Review your credit report carefully
The first step is obtaining a copy of your credit report from both Equifax and TransUnion.
Review your report carefully and look for:
- Collection accounts
- Incorrect balances
- Duplicate accounts
- Accounts that do not belong to you
- Incorrect dates
- Outdated information
Errors on credit reports are more common than many people realize. If you identify any inaccuracies, gather supporting documentation and prepare to dispute them.
Step 2: Dispute incorrect collection accounts
If you believe a collection account is inaccurate, you can file a dispute directly with the credit bureau reporting the information.
You may need to provide:
- Government-issued identification
- Proof of payment
- Account statements
- Correspondence from creditors
- Supporting financial records
The credit bureau will investigate the dispute and contact the creditor or collection agency to verify the information.
If the information cannot be verified or is determined to be inaccurate, it may be removed or corrected.
Step 3: Check whether the collection account should have expired
Collection accounts do not remain on your credit report forever.
In most provinces, collection accounts generally remain on your credit report for up to six years, although reporting periods can vary depending on the province and credit bureau.
If you discover a collection account that should no longer appear on your report, you can contact the credit bureau and request an investigation.
Be sure to keep copies of all correspondence and documentation.
Step 4: Resolve outstanding debts
Paying or settling a collection account will not automatically remove it from your credit report.
However, resolving the debt may:
- Stop collection activity
- Prevent further legal action
- Improve your overall financial profile
- Demonstrate responsible financial behaviour to future lenders
Even after a debt is paid, the collection entry may continue to appear on your credit report until the reporting period expires.
Can you pay to remove a collection account?
Some Canadians ask whether they can negotiate with a collection agency to remove a collection account after payment.
While you may hear this referred to as “pay for delete,” it is not a common or guaranteed practice in Canada.
Collection agencies and creditors are generally expected to report accurate information. As a result, they are under no obligation to remove a legitimate collection account simply because the debt has been paid.
How to rebuild your credit after collections
If you’ve had an account in collections, rebuilding your credit should become a priority.
Some of the most effective ways to improve your credit score include:
Paying bills on time
Payment history is one of the most important factors affecting your credit score.
Keeping credit utilization low
Aim to use less than 30% of your available credit limit whenever possible.
Consider a secured credit card
A secured credit card can help you rebuild positive credit history while reducing risk to lenders.
Avoid multiple credit applications
Submitting several credit applications in a short period may negatively impact your score.
Monitor your credit report
Review your credit report regularly to ensure all information remains accurate.
A real client story: How Samantha stopped collection calls
Samantha, a working mother from British Columbia, found herself overwhelmed by credit card debt, a personal loan, and a growing line of credit. As her debt increased, collection calls became a constant source of stress and her financial situation felt increasingly difficult to manage.
After speaking with Spergel, Samantha filed a consumer proposal that reduced her debt, stopped collection activity, froze interest charges, and allowed her to keep her home. While rebuilding her credit would take time, resolving the debt behind the collection accounts gave her the fresh start she needed.
Samantha’s story highlights an important lesson: improving your credit often starts with addressing the underlying debt problem.
Read Samantha’s full story here.
Can a Licensed Insolvency Trustee remove collections from your credit report?
A Licensed Insolvency Trustee cannot directly remove accurate collection accounts from your credit report.
However, a Licensed Insolvency Trustee can:
- Review your credit report
- Identify reporting errors
- Explain your rights
- Help you deal with collection agencies
- Provide guidance on rebuilding your credit
- Explore debt relief solutions such as a consumer proposal or bankruptcy if needed
If collection accounts are the result of larger debt problems, addressing the underlying financial situation is often the most important step.
Frequently Asked Questions
How long do collections stay on your credit report in Canada?
In most cases, collection accounts can remain on your credit report for approximately six years, although reporting periods may vary by province and credit bureau.
Will paying a collection account improve my credit score?
Paying a collection account may help your overall financial profile and prevent further collection activity, but the collection entry may still remain on your credit report for the applicable reporting period.
Can I remove a paid collection from my credit report?
A paid collection may only be removed if it is inaccurate, outdated, or cannot be verified. Paying a debt does not automatically remove the collection entry.
What happens if a collection account isn’t mine?
You should immediately dispute the account with the credit bureau and provide supporting documentation. If the information is incorrect, it may be removed.
Can a collection agency sue me?
Collection agencies may pursue legal action in certain circumstances, subject to provincial laws and limitation periods. If you have concerns about collection activity, speaking with a Licensed Insolvency Trustee can help you understand your options.
Need help with collection accounts or debt problems?
If a collection account is affecting your credit score, mortgage approval, or financial goals, you don’t have to navigate it alone.
At Spergel, our Licensed Insolvency Trustees have helped more than 100,000 Canadians understand their debt, improve their financial situation, and move toward a brighter financial future.
Book a free, confidential consultation today and learn about the options available to you.
