How to Remove Collections from Your Credit Report in Canada

Key Takeaways

1. There is no “shortcut” available for removing collections from your credit report. The only option is to repay the debt.
2. It takes 6 years after the last date of activity for collections to come off your credit report.  
3. No company has the ability to completely remove collections from your credit report.  
4. If repaying the debt is not financially feasible, there are other debt relief options that can make repayment easier. 
5. Consumer proposals are a common solution for repaying debt in collections. A consumer proposal is a legally-binding agreement that can reduce the total amount owed and how you are expected to repay it.
6. Talking to a 4 Pillars debt specialist can help you better understand what options you have, the drawbacks of each, and what steps to take. 

Understanding Collections in Your Credit Report

A collection shows up when a debt goes unpaid for a long time and is passed to a collection agency.

Collections on your credit report can result from:

1. Missed credit card payments
2. Unpaid phone or internet bills
3. Old loans or lines of credit
4. Missed medical or utility bills

On your credit report, a collection account will look different from regular debt. It shows the name of the collection agency, the original creditor, the amount owed, and the date it was sent to collections. Additionally, collections will lower your credit score more than a late payment.

Once an account reaches collections, it has a bigger impact on your creditworthiness and overall financial health. Collections on your credit report signal to lenders that the debt wasn’t repaid as agreed, making it harder to qualify for loans or a mortgage in the future. 

How Long Does Collections Remain on Your Credit Report in Canada?

In most provinces, collections stay on your credit report for six years from the date of last activity.

That date may reset if:

1. You make a payment
2. You acknowledge the debt
3. You enter a new payment agreement

Paying the wrong way, at the wrong time, can extend how long the collection stays visible.

Is It Possible to Remove Collections from Your Credit Report?

Yes, it is possible to remove collections from your credit report, but it’s a long process. Immediate removal is an option in very few cases.

A collection can only be removed immediately if:

1. It’s reported incorrectly
2. It doesn’t belong to you
3. The dates or amounts are wrong
4. It should have already fallen off (end of 6 year period)

If none of the above apply, the only way to remove collections is to repay the debt and wait six years until it comes off your credit report. 

Is there a quicker way to remove collections from my credit report?

There are no shortcuts or “quick ways” to remove collections from your credit report. If a company tells you they can remove valid collections from your credit report directly, they are likely being dishonest — or at the very least, misleading.

How to Remove Collections from Your Credit Report in Canada

Like we said, no company, including 4 Pillars, can remove collections from your credit report directly. All we can do is provide you with expert advice and information about your debt repayment options. 

We may not be able to remove the collections, but we can help make repayment easier (and potentially quicker if done right). 

Here’s a quick overview of what debt repayment options we can discuss with you:

Consumer Proposal

Consumer proposals are popular at our company as a method to reduce the debt you owe without having to file for bankruptcy. No collection actions can be taken against you once a consumer proposal is filed and accepted. Additionally, your debt can stop accumulating interest during a consumer proposal. 

We can connect you with a LIT (licensed insolvency trustee) to file a consumer proposal on your behalf. Please note that consumer proposals are visible on your credit report and do impact your score, just not as severely as a bankruptcy.

We always tell our clients that the hit your credit takes from a consumer proposal is worth it if it allows you to actually repay the debt. It’s a far better option than continuing to stay in debt for a “better credit score” (which isn’t possible when you’re continuing to leave debts unpaid in collections).

By reducing your total outstanding debt, you can repay the debt more quickly than if you had to repay the full amount. You still need to wait 3-6 years after your consumer proposal is completed to see the collections come off your credit report. 

Book a free, confidential 1-on-1 consultation to learn more about consumer proposals.

Bankruptcy

Bankruptcy is another legal option for dealing with collections on your credit report.

Just like a consumer proposal, bankruptcy does not remove collections from your credit report right away. What it does is stop collection activity once it’s filed. This means collection calls, wage garnishments, and legal actions must stop.

When you file for bankruptcy, most unsecured debts included in the filing are eliminated rather than repaid. This can bring immediate financial relief, especially for people who have little income left after covering basic living costs.

It’s important to understand the impact on your credit. Bankruptcy stays on your credit report longer than a consumer proposal and has a greater effect on your score. In most cases, collections included in a bankruptcy will remain visible for 6-7 years after discharge, depending on your province and whether it’s a first-time filing.

Book a free, confidential 1-on-1 consultation to learn more about bankruptcy.

Please feel free to contact us if you want to learn about alternative options that don’t involve consumer proposals and bankruptcy.

Negotiate with the Creditor

Negotiating with creditors is also an option if the collection debt hasn’t been repaid yet. In this case, you’d be negotiating a reduced payoff amount or new payment terms. This is basically the informal version of what a consumer proposal does.

Creditor negotiation can be used to avoid having to do a consumer proposal, but the informal nature of it means you have no legal recourse if the creditor chooses to back out suddenly. 

If you’ve already repaid your collection debt and are just stuck in the 6-year waiting period, you may be able to negotiate with your creditors to have the collections removed before the 6-year period is over. Keep in mind that it’s at your creditor’s discretion whether to remove it.