This is a pretty common question for those going through a credit repair program or people just trying to clean up the unpaid debts they have. Now we want to first stress that no matter what impact paying a debt will have on your credit if you do indeed owe the debt then legally you are responsible for paying it.
So to understand what happens when you pay a collection it is best to know how a collection is reported on your credit reports. Whenever you go past due on an account the lender will notify the credit reporting agencies that the payment has been missed. If you continue to leave the debt unpaid this negative will continue show on the credit report. Delinquent accounts can show 30,60,90,120,180 days late. If the debt stays delinquent for longer than 180 it will continue to show as 180 days late until the debt falls off the credit report. After 180 days late you will generally see the lender charge off the account and sell the debt to a third party to collect. Once the debt has been moved to a third party that company must then notify the credit reporting agencies and then you will have a collection on the account.
So How Long Will Collections Remain On The Credit Report?
All collection account will remain on the credit reports for 7 years after the account first went 180 late. So basically 7 years after the account was charged off. This is regardless of how many collection agencies end up purchasing the debt during the 7 years or whether or not the account becomes paid.
So It Doesn’t Matter If I Pay The Account
Well, in most cases, as far as your credit score is concerned it doesn’t. This does not mean that you shouldn’t pay the account. If you leave the debt unpaid creditors still have the option to sue you for the balance. If a credit does decide to sue you, you can be slapped with judgement which can bring your score down even further. Along with a judgement a creditor can get a garnishment or bank levy depending on the state that you live in. So we always recommend taking care of the debt that you do owe.
Does Paying A Collection Ever Improve The Score?
There are some instances where you can negotiate a “pay-for-delete” on your collection accounts. A “pay-for-delete” is exactly what is sounds, it is a where the lender will agree to have the account removed your from credit reports as long as the debt is paid. This is not extremely common but is something that can be looked into if you have a collection account.
Now while paying a collection may not directly improve the credit score it will show as paid and this can still help to get loans, mortgages or apartments which is what credit is for. So, if the debt is yours and you have the money to pay it, do so, it can save a lot of headache down the road.