How to Remove Collections From a Credit Report in Canada

When financial trouble hits, it may be difficult to pay all of your bills on time. Whether it’s due to a divorce, job loss, unexpected illness, or something else, it can be stressful trying to get your finances back on track. You may also be worried about the impact late or missed payments can have on your credit report.

It is important to have good credit so you can get a loan, be approved for a credit card, get an apartment, buy a home or car, and get the best interest rates when doing so. If you have months of missed payments, your creditor can choose to send your account to a collection agency, which will show up on your credit report as a collections entry. Having a negative entry like this can turn your good credit score into a poor one.

However, it is possible to remove collections entries from your credit history–with some time and effort. Read on to learn effective strategies to remove collections from your Canadian credit report and rebuild your financial standing.

Understanding Collections on Your Credit Report

When you have a debt in collections, it means the creditor has reported the debt to a third-party person or agency to reclaim the amount owed. There are different types of collections, like medical bills, credit card debt, or unpaid student loans. 

The longer the account goes unpaid, the more it can hurt your credit score. A debt in collections is one of the most serious negative impacts on your credit report because it means the creditor you owe money to has essentially given up on getting it back. Organizations looking at your credit report may see you as a risk given your history of unpaid debts, and be less likely to do business with you in the future. 

Bruce Sellery (Credit Canada CEO): “If the call has already gone out to the collection agencies, does that mean the damage is already done to your credit score?”

Doug Hoyes (Licenced Insolvency Trustee): “There is already a note on your credit report that you’re behind, yes… Your credit is already impaired. You’re already months, months, and months behind. So... instead of worrying about your credit report which is already damaged, deal with the problem and be done with it.”

~ Excerpt from the Moolala: Money Made Simple podcast episode: Debunking Debt Collection Agency Myths featuring Doug Hoyes

A common misconception people often have is that paying off a collection will instantly remove the entry from your credit report. There’s a difference between paid and unpaid collections. When you pay off a collection account, it’s marked as “paid” on your credit report. This can help improve your credit score, but it won’t erase the damage completely. Regardless of whether your debt is paid or unpaid, the collections entry won’t be removed from your report until it expires. 

Steps to Remove Collections from Your Credit Report

While it is possible to remove a collections entry from your credit report, it does take some time and effort. Here are a few steps you can take to have a collections entry removed from your credit report: 

1. Review Your Credit Report

It is important to review your credit report at least once a year from either of Canada's two main credit bureaus (Equifax and TransUnion), a third-party service such as Credit Karma or Borrowell, or your bank’s website or mobile app. Look over the report to see what’s documented and keep an eye out for collections entries. 

2. Verify Collection Details

If you do find any collections entries on your report, be sure to verify the entry’s date and the name of the collection agency. Once you have this information, you can consider whether to have the collections entry completely removed from your report, depending if the entry is expired or has been paid. 

3. Wait Until the Collections Entry Expires

In Canada, paid and unpaid collections entries stay on your credit report generally for six years from the date of the first missed payment that led to your account being sent to collections. Once six years have passed, the collections entry is considered expired and should automatically be removed from your report. Make sure to verify that the expired entry was removed when it should have been. If not, you will need to file a dispute with the credit reporting agencies. 

4. Negotiate with the Creditor

If you’ve paid off the collections debt in full before the six years have passed, you can ask the collections agency to remove the entry from your credit report sooner. However, there’s nothing that requires the agency to agree to this. Whether the agency agrees typically depends on the debt’s amount and your previous account history. 

5. Dispute Inaccuracies

You can request an expired collections entry be removed from your credit report by filing a dispute directly with either of Canada’s credit bureaus. Once received, the agency will investigate and if they confirm the entry has expired, it will be removed from your report and they will provide written confirmation of doing so. You can file a dispute at no charge online, by mail, or over the phone.

6. Seek Professional Advice

Need help understanding your credit report? Call Credit Canada for personalized advice on rebuilding your financial standing. One of our certified credit counsellors can provide advice tailored to your specific situation—and our counselling services are completely free! A counsellor can even review your credit report and advise you on how to best address your debts and increase your credit score.

Working with Credit Repair Agencies

A credit repair company is an organization that offers to improve your credit history by removing negative information from your credit report in exchange for a fee — which can sometimes be very high. They may also offer to negotiate with credit reporting agencies to improve your credit score or encourage you to take out a high-interest loan to pay off your debts. 

Keep in mind that while a collections entry can be removed, you can’t remove accurate information from your credit report—even if it’s bad! You should be skeptical of any company that says they can remove accurate, negative information from your history. Be aware that these agencies make money from fees, set-up costs and interest, so you may be left with more debt and no change to your credit score in the end. 

If you're looking to rebuild your credit, check out our Credit Building Services to learn how you improve your credit score with FREE Credit Building Counselling from our certified Credit Counsellors.

Preventive Measures: Avoiding Collections on Your Report

The only way to improve credit is by rebuilding it with a positive credit history. You have to show your creditors that your financial habits have improved, which takes time. With this in mind, it’s important to try to avoid having your accounts sent to collections in the first place. You can do this by: 

• Regularly review your credit report to see what’s documented and if the information is correct. 
• Make minimum payments by the due dates as late payments have a negative impact on your credit. A history of consistently paying down debts can be a good starting point for maintaining your credit health. 
• Work to pay down your accounts by putting the most money towards unsecured debts first, such as payday loans, credit cards or personal loans, as these tend to have the highest interest rates.
• Use our FREE Budget Planner tool to create and stick to a monthly budget and stay on top of your finances.