Collection accounts on your credit reports are never a good thing. Even an isolated collection listing can lower your credit score enough that you won't be approved for the best interest rate on loans which can end up costing you a significant chunk of change. The total damage from that single collection account which may have been for less than a hundred dollars could amount to many thousands of dollars in higher interest rates and higher car insurance premiums because of the impact it has on your credit rating. For this reason, before applying for a new home loan or other type of credit, it is advisable to try getting collections accounts removed from your credit reports.

If you have a small number of paid collections on your credit reports that are of a relatively small value, you'll want to start by sending the reporting collections agencies a goodwill letter. Goodwill letters are you asking the collections agency kindly to stop reporting the collection account to the credit bureaus. And while this may seem like a hopeless attempt, goodwill letters have proven to be surprisingly effective for getting negative items removed from credit reports.

When composing a goodwill letter, the goal is to humanize your situation and make the person on the receiving end of the letter sympathize with your predicament. A sample goodwill letter to a collections agency might read as follows.

"Dear Sir / Madam,

Last year I received a parking ticket during the last week of school because I was running late and had to take the first spot I could find. In the confusion of finals week, the holiday break, and the start of a new semester, I neglected to pay the fine and it was sent to your agency. As soon as I received notice from you, I paid the debt in full.

My husband and I recently began shopping for our first home and are finding that the negative listing on my credit report is hurting our ability to get approved for some financing. I'm writing to ask if you would kindly remove the collection listing from my credit report.

Best regards,

Jane Doe"

Sometimes that's all it takes: a brief, simple, non-accusatory letter written in a friendly tone. If the letter does its job, your credit reports look that much better and your credit score can see a sizable improvement. If not, worst case scenario you are out the time it took to write the letter and the cost of first class postage.

One thing to remember is to make sure you do not try to use this method to remove an unpaid collection account. Not only will it not work, but it could make matters much worse for you. This seems like a common sense rule, but it is something people sometimes do not think about, especially if they are enlisting the help of a credit repair service to help clean up their credit reports.