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Still dogged by bad credit after paying debts

Dr. Don Taylor, Ph.D., CFA, CFP, CASL
Don Taylor

Dear Dr. Don,
A couple of years ago, I was struggling with my finances and had two of my debts go into collection. I made arrangements to pay both of them off for the amounts that the agencies requested. So, we should be all square. But I still have to pay a penalty for my problems. Is there a way for me to get these bad experiences removed from my credit report? What can I do?

-- Mark Modify

Dear Mark,
With a few exceptions, most negative information stays on your credit report for seven years from the time the problem begins. For you, that was the date of your original delinquencies. When an account goes to a collection agency, it won't ever be truly considered current on payments, even if you paid off the accounts in full.

You'll occasionally hear of a credit negotiating firm saying they can get a creditor to agree to modify your file as a condition of repayment. You'll even read about some do-it-yourself approaches to negotiating a change to your credit report with the collection agency. Let me say upfront that I'm not a fan of credit settlement firms. At this point, trying to negotiate what's called a "pay for delete" to remove the collection account from your credit report after you've made arrangements to pay the accounts has a low probability of success, as you had noticed.

From this point on, staying current on your accounts and letting the seven-year clock run out is likely to be the best way to improve your credit score and credit history. Trying to shorten the process isn't likely to work for you. You needn't possess a spotless credit history for access to credit. The closer you get to that seven-year hurdle, as you pay bills on time, the easier it will be to get newly approved for credit.

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