Guide to disputing collections.You’ve just opened an official-looking envelope and learned that a creditor is sending you a collection notice — what do you do?

First, if the collection is for a small amount of money, consider paying it (even if you don’t owe). Sometimes it’s easier and smarter in the long run to pay a collection and move on. While you can dispute collections, it’s time consuming and it doesn’t always work.

However, if you want to dispute the collection, here’s a step by step guide:

1. Put a date on every piece of correspondence and make a copy of everything. You’ll need copious records if you’re going to win.

2. Within 10 business days of receiving the notice, send a letter to the collection agency indicating you wish to dispute. If you don’t get this letter out in time you’re not going to be able to dispute the collection and you’re admitting you owe the debt. Keep in mind that you MUST SEND A LETTER – a phone call does you no good here because you need proof you contacted them. You might even send the letter certified mail so you have proof it was received.

3. Once you dispute the collection, the creditor is required to prove you owe them money. Believe it or not, collection agencies will often drop the matter right here. For a lot of creditors, it’s too hard to provide proof (this is especially true of medical collections). They have to dig through records, find your signature, etc. This is the biggest credit repair tip I’ve got!!

4. If the creditor provides proof that you owe, make sure you haven’t already paid. Sometimes collections are pursued in error. Again, this is often the case with medical collections.

5. Negotiate the amount of the collection that you’ll pay. If you can’t find proof that the debt was paid, call and speak to the collection agency and explain to them that you believe you’ve already paid this bill. However, since you have no proof, offer to pay a portion of the bill to settle the dispute. Typically you can settle a collection for half of the amount owed. If the collection is large (in excess of $1,000) you may even be able to settle for less than half. This negotiation can take time and a few phone calls, but it’s worth it. Speak to the manager if you don’t like the answers you’re getting. At the end of each conversation make sure you record the day and time as well as the name of the person you spoke to and their direct number.

6. Send a letter summarizing your negotiation to the collection agency and ask them to re-bill you for the negotiated amount. Don’t pay the collection agency one dollar until they’ve sent you a new bill for a lower amount (otherwise, they may apply the lesser amount to the full balance and then bill you for the rest). Make sure the bill shows that the lower amount, when paid, will satisfy the debt. Keep every record so that if they come back asking for more money later you have proof they were paid.

If you have collections that you didn’t dispute immediately…

If you have any collections that are showing on your credit report, your first step is to dispute them with the credit bureau. Go to each credit bureau’s website (links below) and dispute every collection. Remember, when you dispute a collection the creditor is required to provide proof of the debt. Depending on the age of the collection, the creditor may not be able to provide proof and the collection will be dropped. If the creditor does provide proof they will also provide contact information to help settle the debt. You can then follow the steps above.

Disputing collections online is the easiest method of dispute and it’s recommended by all three credit bureaus.

Some people reading this may be tempted to dispute every debt — after all, if creditors typically settle for less than full balance (assuming they can even provide proof) why would anyone pay their creditors in full? Remember that even if the collection is settled and your credit bureau is never affected the creditor will not extend you credit again. Don’t dispute a debt from a creditor you want to have a relationship with in the future (like your personal bank, for instance).

Credit Bureau Collection Dispute Links:

Experian Disupte

Equifax Dispute

TransUnion Dispute

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