Many of us face occasions where we are not able to pay our bills on time, be it due to a job loss, unexpected medical bills, or even a divorce. These times can be particularly stressful as you try to get your finances in line, and a natural worry for many Canadians is the impact late or missed payments can have on your credit score. If creditors choose to send your account to a collection agency, it will show up on your credit report as a collections entry. For this reason, you may well be wondering how to remove collections from credit report in Canada. The good news is that you can, and 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.
How does a collection entry affect your credit score?
There are various types of debt collection. These can vary from unpaid medical bills to overdue mortgage payments, to unpaid car loan debts. All of these types of debt collection can be harmful to your credit report. This can impact your ability to borrow more money or credit, even more so at a reasonable interest rate. For this reason, many people wish to remove collections from credit report in Canada. Debt collectors often employ collection agencies with the sole purpose of reclaiming the money they are owed. They will try to contact you, threaten you, and in the most serious cases can even pursue legal action in the form of freezing your bank accounts or having your wages garnished. For this reason, it is important to tackle two issues – having the collections removed from your credit report, and also addressing the root cause of your missed or overdue payments.
How to remove collections from credit report in Canada
Repaying your debts is one thing, but it is another thing having collections lingering on your credit report afterwards. Although it will take some time and effort, it is possible to remove collections from credit report in Canada, and to rebuild your credit. You will want to have them removed, as collection entries can harm your credit score and can even stop you from taking out additional credit, including car loans and mortgages. There are only a few instances where you may not be able to remove collections from a credit report, which we will touch on later. Here is how to go about removing collections from credit report in Canada:
Review your credit report
First of all, you should get a copy of your credit report. You can get one from Canada’s primary credit bureaus, Equifax and TransUnion, and you are entitled to a free report each year. Once you have a copy, make sure you run through it with a fine tooth comb and look for any collection entries. If you do find any, take note of the entry’s date and the name of the collection agency. From this point, you can decide whether or not to go ahead with trying to remove the entry from your credit report altogether.
Wait for the Statute of Limitations to pass
In Canada, each province has its own debt statute of limitations. This is a period of time that passes from the date of the first missed payment, after which creditors and collection agencies cannot pursue any legal action against you. While they may continue to threaten you and chase you for your payments, this is typically an empty threat as they cannot act. Across Canada, the statute of limitations on collections is six years, after which the collections entry will be removed from your credit report. Do check that it has been removed when it should – otherwise, you will need to ask your creditors to remove it. Of course, a collections entry will have less of a negative impact on your credit report as time goes by, as creditors are most interested in your recent credit history.
Ask creditors to remove negative entries
Although typically you may need to wait six years for your collection entries to be automatically removed from your account, it does not mean you cannot have them removed sooner. If you happened to make your payments regularly before your debt was in collections, you may be able to ask the collection agency to have the entry removed from your credit report. To have this happen, you would need to share proof of the payments you made on time to the collection agency. They could then decide to contact the credit bureaus and ask them to remove the entries. Collection agencies have no obligation to do this, but if they do agree, ask them to send you formal confirmation that they will do so that you have evidence just in case.
Offer pay for removal
Pay for removal is the process of asking a debt collector or a collection agency to remove a collection entry from your credit report for a payment. The creditor or collector, however, has no obligation to accept this. Their decision as to whether or not to accept is usually dependent on the age of the debt, and your account and payment history. Usually the debt collector will expect the full amount of overdue debt to be paid, as well as any applicable interest and fees.
Speak to a Licensed Insolvency Trustee
Licensed Insolvency Trustees are the only professionals in Canada legally able to file all forms of debt relief. They are also experts in advising you on how to remove collections entries from your credit report. They can also help you to understand how to rebuild your credit score. Licensed Insolvency Trustees can help you to take the steps required to stop harmful entries on your credit report. If you are struggling to make your debt repayments, they will also review your financial circumstances and can advise you as to whether a form of debt relief like a consumer proposal or a bankruptcy may help you to begin a fresh financial future. Having your debt reduced or cleared can be a huge relief, and can put a stop to your missing or overdue payments. If you are struggling with a bad credit score, you may feel it is all a little overwhelming and unsure of what to do next. No matter how bad you may feel your financial situation is, there is always a solution. At Spergel, we have been helping Canadians gain financial freedom for over thirty years, and we are here to help you too.
How to remove expired debt collections from your credit report
When reviewing your credit report, you may notice some expired debt collection entries on your credit report that have still not been removed. There are ways to get this removed yourself. The best way to go about this is to file a dispute with the credit bureaus, Equifax and TransUnion. They will look into the entry, and should they find it expired, they will take the steps needed to remove it from your credit report. You should receive written confirmation once they have removed the entry, so be sure to hold onto the documentation for this to ensure it does get removed. Either way, you should make sure you do not check your credit report too often. Each time you check your credit report, an inquiry will be added to your file, and too many of these can have a negative impact on your credit score.
At Spergel, we are here to help remove collections from credit report in Canada. Perhaps you have tried yourself to no avail, and need some professional help. Our team are experts in doing so, and can also review your financial circumstances. We will advise you as to the best steps to take to gain financial freedom. Book a free consultation today – you owe it to yourself.