Definition

• Collections on your credit report are entries for unpaid accounts that were turned over to collection agencies. Your original creditor, such as a finance company or credit card issuer, tries to collect past-due bills for about six months before writing off the bad debt on its taxes, according to MSN Money writer Liz Pulliam Weston. The creditor then recoups some of its lost money by selling the account to a debt collector, who adds an entry to your Experian, Equifax and TransUnion credit bureau reports. The negative item hurts your ability to qualify for new accounts unless you get it removed.
  
  

Methods

• Collection agencies are legally allowed to add entries to your credit reports, as long as the information is accurate and the most recent account activity took place less than seven years ago. You can remove collections by using credit bureau dispute forms if your account is older than seven years or the item contains any mistaken information. You can also submit a form to the collection agency confirming a verbally negotiated settlement that includes removal of the credit report data.
  
  

Dispute Forms

• The three credit bureaus are required to accept and investigate consumer disputes under federal law. All three will provide you with free yearly credit report copies through AnnualCreditReport.com upon request. Visit the individual bureau websites and fill out their complaint forms if you find anything wrong with a collection account entry, like a misreported date or amount, or if the seven-year reporting period is over. Experian, Equifax and TransUnion get 30 days to check with the collection agency and must remove the entry if they get no response or the debt collector cannot produce documentation.
  
  

Settlement Forms

• You can negotiate a settlement with a debt collector over the telephone, but always follow it up with a written form stating the exact terms before you make a payment. Collection agencies often agree to accept much less than the original amount as payment in full, according to Bankrate writer Lucy Lazarony. They pay very little for bad debt accounts. Explain that you will only pay if the collector agrees to remove the information from all three of your credit reports. Write a letter stating the date of your phone conversation, the name of the person with whom you spoke, the settlement amount and the removal agreement. Send it by certified mail to the collection agency before you send the money.