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What Happens to My Credit Score If I Start Paying a Collection?

Written by Diane Moogalian on August 21, 2013 in Credit  |   51 comments

Collections can negatively impact your credit score, but they can disappear from your credit report after seven years and 180 days from the account’s delinquency date. Should you wait for that to happen, or should you pay off your collection accounts?

credit score, credit reportPayment history makes up about 35 percent of your credit history, and paying your bills in full and on time is positive for both your credit history and your credit score. On the other hand, one delinquent payment that is just 30 days late will remain on your credit report for up to seven years from the date of last activity.

After some period of negative behavior on one of your credit accounts, such as delinquent payments or a charge-off, your debt may be sold to an outside collection agency. If this happens, it’s to your benefit to pay off the collection, thereby satisfying your commitment.

How long will a collection account remain on your credit report?

In general, a collection account will remain on your credit report for up to seven years plus 180 days from the date the account first became past due. The countdown to the account falling off your credit report begins 180 days after the start of the delinquency that led to the collection.

For current residents of the state of New York, paid collections will remain on your credit file for only five years. All unpaid collections from the state of New York will remain on file for the full seven years.

If you have an account in collections, consider creating a budget to pay off the debt as quickly as possible. While an account that wound up in collections will remain charged off, paying off a collection can still reflect positively on your credit history.

When you apply for a mortgage or other loans, for example, lenders may see that you have paid off a collection and satisfied the debt, and they may take that payment behavior into consideration.

The amount of time a collection remains on your credit report, though, will not change as you start to pay off the collection account.

Adding a consumer statement regarding a collection account

If an account that you have paid off in full is still listed in collections on your credit report, you can add a brief consumer statement—up to 100 words, or 200 words if you live in Maine—explaining that you have satisfied the debt. The statement will become part of your credit report and will be included each time the report is accessed.

You can also add a consumer statement if you disputed a collection listed on your credit report and the resulting investigation did not resolve the dispute to your satisfaction. Your statement can be added, free of charge, to your Equifax credit file online. You can also send your information in writing to:

Equifax Consumer Services LLC
PO Box 740256
Atlanta, Georgia 30374-0256

Once your collection account has a balance of zero, it is considered paid in full and it is not necessary for the creditor to make a note that you have satisfied the debt.

Filing a dispute

If you spot any errors in your credit report—for example, a paid bill marked as unpaid—you can file a dispute with the credit reporting agency. A creditor may have failed to report a payment, or you may never have received a bill that was eventually sent to collections.

At Equifax, you can file a dispute online, by phone, or by mail. You can also contact the creditor directly in order to resolve the error.

Diane Moogalian is vice president of operations for Equifax Personal Solutions with responsibility for operational strategy and execution in support of customer care and fulfillment of credit and identity-related products for consumers. Prior to joining Equifax in 2007, Diane held several strategic roles with leading financial services companies. Diane graduated from the University of Richmond with a bachelor of science degree in business administration (marketing and economics) and earned a certificate in international business from Virginia Commonwealth University.

51 comments

  1. gary says:

    why is it so easy for a collections agrncy to put stuff on your credit report and so dam hard to get it off

    • Tony Peepz says:

      Because the credit bureau technically works for the Creditor reporting Agencies for the fact they get paid to by the (3) Credit Bureau each time they submit a collection Debt on an individual (FACT) Few key phrases such as Name, Address And amount owed. Now Trying to get it off is the tricky part because it gets sent through a Electronic System where most of the time some person in India where they outsource the large amount of data by stacking them on top of others and just stamping it Valid Debt ….

  2. Anonymous says:

    I have learned that you can have collection accounts deleted if you contact the creditor and ask for a settlement amount and get them to give you a letter stating to have the account deleted. I had several accounts I settled doing this.

    • Tony Peepz says:

      Not in all cases but in most cases mainly medical the doctor doesn’t want to ruin your life after the debt is paid in full and calls for immediate deletions on (CR) But still ask for a deletion before paying it off chances are they will send you a deletion letter after debt is paid in full ..

    • Brenda says:

      Who is this letter given to…or who deletes the account?

      • J.D. says:

        You would give the letter to the credit bureau although they will just dispute the account normally (check with the agency to make sure it’s a valid letter) and then take it off depending on the response. Also keep in mind a collection agency can remove the account through their communication system set up with the bureaus.

  3. erica says:

    Im confused about when the timer starts ticking on an account in collections. In thr opening paragrph you said “On the other hand, one delinquent payment that is just 30 days late will remain on your credit report for up to seven years from the date of last activity.” The word activity is making this article hard to understand. You stated that if a person pays a collection account that’s good because the account is paid off; however, when you pay on the account don’t you start the activity over again? Also, the collected account is paid but it’s going to be reported as a paid charge off account. It still hurts your score. The best thing to do is to negotiate with the collection company and work out some way if you pay the account off can they remove the blemish from your credit report.

    • Danny says:

      again every time you make a payment you keep the acct open for another 5 to 7 years depending on the type of bill and creditor but paying it off will get it update to pad in full which is better then settling the acct or making payments for whatever amount of time it works both ways though had the person the bill belongs to kept update info with the original creditor they would received letters and calls and would know about the debt within their validation period and not had it sent to their credit so yes there is mistakes however the fault is on the individual more times than not

  4. anony-one says:

    agree with erica. done it. before paying negotiate a settlement price and that they will remove from credit report. get a signed letter about agreement from them before sending money. done this twice. report cleaned inside of two months both times.

  5. Anonymous says:

    I had a medical facility turn my account over to collections because my insurance took to long to pay. Equifax removed it as a courtesy, then put it back a month later.

  6. sue tanya says:

    is there a way to get rid of the negative history once you paid them all off? and start with a clean suite. seven years of bad record is just too long because many things in life are in transition and financial status goes up and down over the years.

  7. Tony Peepz says:

    OK… it’s simple once you fail to pay your debt for what ever reason they will give you a at times a few months after you went in collection before they start trying to render your credit at this point they can process your information to there collection reporting agency or a lawyer the process can take up to 60 days before you even see it and the agency can only report that month but state the account was open from such & such opening day of account .. so they make it sound as if it just went into collections when in fact it was there already for months but they figured you had no means to pay them back anytime soon they will just start reporting from that point on…

    2nd Question > Paying off an account can mean a few things (paid in Full) (Settled For Less)(Charge Off) (Late Payment) Which all are considered collection accounts even if you don’t see them on your report ,now Paying a collection off that is new to your credit report is a good thing try for the deletion if possible give them a sob story if not worst thing is it will stay on (CR) for 5 years but will stop damaging your score after the first 12 months, now if you have an old debt lets say it’s been on your (CR) for 6 years leave it don’t pay it off it will fall off on it’s own and will do more damage to your (CR) paying it off because by paying it off even tho it’s good to pay your bills can adversely do more harm then good not to mention another 5 years renewed on your (CR)
    P.S Call the creditor speak with them to arrange a deletion if possible chances are after being past around from collection agencies to agencies they will have no problem catching that payday and deleting it for you try to get it in writing because you don’t want them to pass off the collection agency after paying it off hope this all helped

  8. Anonymous says:

    I’m still unsure should I pay off my collections accounts?Will it increase my credit score or not?

    • Tony Peepz says:

      Paying off a credit debt will not increase your score right away but over time it will, paying it off with a deletion will .

      • Karmen says:

        Hi Tony, within the past 2 days I paid off ALL my debts that were on all THREE Credit Reports. I owe NOTHING/ZERO on all accounts. Now that that’s done, are you saying that if I contact the creditors and ask them to, either contact the Credit Bureaus and request they delete the debts or get a letter from each Creditor requesting Credit Reports delete the debts from the reports, at that time, only when the debts have been deleted, my credit score will go up?!! How long of a process is this?

  9. Lou says:

    Good Luck with negotiating with the collections company. I did just that,
    negotiated to pay-off to have some accounts removed, but they still report as a collection account after paying them off. It’s really stressful to get
    any collection removed after you pay them.

    • Dorothy says:

      Yes I paid a check off 2 wks after and it wasn’t shown as paid until 6yrs. later and then the courts would only allow the person to put date she came in to have it removed and won’t remove it until 2014.

  10. chuck says:

    you can’t win with collection vultures. if it’s over $100 why bother doing anything?

  11. Susan woody says:

    I had a collection I was unaware of because they were sending the bill to a previous address. ( medical bill). it was not on my report either. the only way I found out about it was when I attempted to see that doctor again. I was told I’d have to pay the collection account first. so I paid it, along with a few small amounts that had been charged off. it wasn’t until after I paid it that it showed up on my credit report as negative collection account and is still marked unpaid. how was I to know about it after the way insurance works if I never got a bill? why would they put it on credit report only after I pay it but report it as unpaid? should I contact the medical office or the collection agency or file a dispute? which avenue might give me best results? thank you for any advice

  12. fausto says:

    Why is it that if someone in your family steal your identity you are held responsible for that account? If someone in your family commits a murder are you to be held responsible for that murder?

    • Danny says:

      they would have worked with you if you filed a police report and gv copies of the police ppwrk to the collection co thy would have deleted it

  13. Karen Lantry says:

    If anyone has watched the report on the three major
    Credits bureaus u would know there is no way
    To change anything on your credit report.
    They tell u they will fix it but never will. U could
    Send all the evidence and they r under no law to
    Have to fix the errors. Once anything is on there
    It will remain for seven years. Don’t let the collection
    Agency’s fool u. They have no department to fix
    The errors. That has been proven.

    • CCS, Florida says:

      I had student loan and became disabled there is a clause that I was made aware of that if you are disabled the loan is written off and removed from any form of collection. I called The Department of Education to verify and they said that is true. After going through all the paper work etc.. for almost 8 months they just sent a letter stating it was approved. I sent the evident/letter to Equifax and with an almost month investigation it still remains on my credit. So why is it still reported as negative credit, when it says it is no longer a collection or account since last year? Equifax reply after investigation is “this account belongs to you” when that was not my issue my question was can you remove from my report? because I am not liable as I am disabled. Anyone else experienced this and what did you do? Do I need and attorney or go to Lexington Law for advice? or is the Department of Education refusing to follow the guidelines?

      • Danny says:

        the bill is still yours and affected your credit if they had up to dte info for you they would have been able to contact you within your validation period prior to the credit reporting so the clause lets you out of repayment and collections but does not help your credit that is not part of the clause

  14. stuck in the middle says:

    My boyfriend’s exgirlfriend put his name on an online student loan application that did not require a signature and now she has defaulted on such loan. The student loan company will not remove his name from the accoutn without a court order, even though they are the ones that allowed for an online application without an actual verifiable signature. The State Police even had a conference call with this company and they said there is nothing they can do without a “court order” The question was asked so if the exgirlfriend is hit by a car tomorrow, there is no way to get a court order as we have to prosecute her, so who is responsible for the loan and the company said he would be. This is not fair he is a victim of fraud and now he can’t even get a loan for his business as this defaulted student loan is haunting him.

    • Tony Peepz says:

      Ask the reporting agency to send the stolen identity forms to your mailing address so you can begin the processes to get it taken off your record aslo retain a copy of the police report make copies and send any proof out Certified only with return address . Hope this helped :)

      • Ahviya says:

        Also, when filing a report with the State Police, keep in mind when they investigate, ask them to obtain copies of the documents from the online school. Included in the documentation should be the computer IP address that she used. This will also help with the suit against her. The IP address is registered to her and will help with your fraud case.

        Good Luck

  15. Anonymous says:

    Never pay off an old collection account it will hurt your score brings back to life like you just opened it and starts the time all over again. The only way to do it is if they give you a letter saying it will be removed other wise just work on paying your bills on time and your score will go up

    • Curious and confused says:

      is #15 true? I have charged off accounts that will roll off my credit report in 6 months. I am now in a position to pay them off. Will it hurt my credit more to pay them off?

      I see I have one small charged off account that was sold to a collections agency and the clock started over when the collection agency started reporting it. So that one debt stays on my credit report for over 14 years?

      • Tonya says:

        Why pay them if they are goin to fall off in 6 months. It wont show if u paid them or not when they fall off ur cr. As for the collection acct, sent them a certified left of acct verification and if the collect company dont give all the info u requested, it will have to be removed frm ur cr. U can google the internet on example forms to send a collection agency. I cleaned up me and my husband credit on numerous collection accts using that method of verification:)

      • Danny says:

        Tonyas advised does not always work as far as the federal and state laws stated proof of debt consists of the original creditor stating yes they owe this so the forms she is talking about are from notorius consumer agencies that have constant lawsuits with collection companies and almost always lose they are overly aggressive again know your rights but at the end of the day take responsibility for your bills and take care of them when you can

        • ItsGottaBeMiMi says:

          Federal and state law does not say an original creditor can say “yes, you owe this.” Consumers have rights and part of those rights include the ability to challenge a creditor about a debt. When writing the letter, the consumer can request specific proof, and if the creditor cannot provide it within 30 days, then by law the item must be deleted. The consumer must be specific, I.e, ask what names were used when said account was opened, the address, phone number, and what is the mother’s maiden name listed, in addition to the last four digits of the credit card from the last payment that was made to the account. Any legitimate creditor should have access to that information, although they might not want to take the time to locate it all and send it via letter to you within 30 days! As a consumer, you have the right to request specifics in a day and age when identity theft is taking over! If a creditor does not like it, they should get involved in a different business. It is the law, and consumer’s have the right to ask for specific proof that satisfies their disbelief.

  16. Dorothy says:

    my question was how long do Dr. bills stay out there ?

    • J.D. says:

      Normally seven years from the date the service was rendered or a little after. Either way its seven years after the Date of last activity or date of first delinquency (purge date)

    • Anonymous says:

      you would have to check your state lwas ny is 6 years and they are post statute and 4 years for pa again different state to state

  17. CCS, Florida says:

    Are student loans removed from your credit report as negative credit even after they tell you by letter that you are no longer liable due to disability? Who is responsible for removing from your credit or will it get removed? Why should it be reported as negative credit?

    • Ahviya says:

      If you received a letter from the Department of Education, and have sent it in to the collection agency and they refuse to remove it, file a complaint. You can file a complaint with the FCC and with the FCRA both in Washington, DC (google addresses). Send the evidence that was sent to the collection agency and their response.

      Whenever you correspond with a collection agency or filing a complaint send all documentation via certified mail/return receipt requested. This way you can prove that you sent the documentation and when it was received. This one step can make or break your case. Collection agencies LIE!!!!!!!!!! If you have proof of when documentation was sent and received by them, then this will work in your favor.

      Collection agencies don’t like to remove debt ~ when they are forced by the laws for failing to comply, they will remove or be sued.

      Good Luck

  18. CR says:

    in 2010 I had a student loan charged off. Should I just pay it off or can I wait until 2017 and will that debt disappear?

  19. Joe says:

    [I have been reading through some of these posts but I admit I have not read them all so forgive me if this is repeated information.]

    Be careful about negotiating a “settlement” amount with collection agencies.
    I did this a few years ago, being naive and inexperienced will all of this.
    They agreed to “settle” my debt for only 25% of the full amount.
    I was initially delighted that they had decided to “work with me”.
    But I quickly learned that they reported the remaining 75% of the debt to the IRS.
    Because they did that, they had effectively “washed their hands” of the matter and could no longer come after me for the full amount of the debt.
    However, the IRS considers that 75% amount as “income” and of course I had to pay taxes on that.

    Simply because a collection agency tells you they will settle for a lesser amount than the face value isn’t necessarily good for you.
    All they’re trying to do is make a profit on the debt they purchased from the original creditor at 5-50% of the original debt amount.
    If they can’t get you to pay all of that, they will take what they can get, report the remainder to the IRS, and now you have a new debtor to pay (the IRS).
    And most of the laws that apply to collection agencies don’t apply to the IRS — the IRS can do practically anything they want.

    • Scott says:

      I’m not trying to sound like a snob here, but that’s tax law – not the debt collector or the IRS screwing you over. To make this clear, you don’t owe the IRS the remaining amount of the debt. What you needed to do was to report the amount that you didn’t have to pay as income on your taxes. The IRS sees that as taxable income. I’m sure the collection agency reported to the IRS that they wiped out part of your debt (companies have to account for this and have to report it). Now, if you don’t report that as income on your taxes and you get audited by the IRS, they will see this and you will have to pay penalties.

      So in the end, you don’t owe the IRS the amount that you didn’t pay the collection agency. If you got a letter from the IRS saying that you do owe them that amount, I would go see an accountant to figure out what is going on.

      Source: I’m an accountant.

  20. Mike says:

    I have a 680 credit score, am paying all of my bills on time.

    There are 2 small items on my credit totaling $110 that are set to fall off in late 2014. It looks like my credit score will shoot up to around 730 when those drop off.

    Should I contact the collection account holder and pay the $110, or would that actual do my credit rating more harm than good, re-starting the 7 year process of those items falling off my credit report?

    I want to do what’s best for my credit rating over the next 12-24 months.

    Thanks.

    • ItsGottaBeMiMi says:

      If you pay those items off, the accounts will resurface on your credit report like a new negative item. Let it fall off, naturally.

      • Mika says:

        I guess I am a little confused. When an acccount falls off the CR, will it get picked up by another collections department and start the 7 year process all over again? If the answer is no. Will it be wise just to negotiate removal and pay off with the creditors that have a longer lasting effect on the CR?

  21. KK says:

    I have a charge off on my account that was just added last year. If I decide to go ahead and pay it off now that I have the funds to do so will it still show as a charge off that was eventually paid off or will it just show paid?

  22. Confused. says:

    Wow, I’m shocked and over whelmed with all the info. Especially that part of the IRS receiving the reminding debt. I made arrangements today to settle a debt with 43% off. Do I or not? The collection agency told me that they could not remove the debt from my credit report but will send me a letter in 30 days stating I have paid on full in which I will then fax the letter to all three bureaus. I want to buy a house in two years and my debts with collections are about 4 years ago I believe. I am just beginning to fix my credit, hence considering paying off old debts. Do I pay them or not? And will it make it harder for my fico score to raise? I figured within another two years when I would have saved enough money for a down payment, I could wait a few more months for them to drop off. I’m worried about starting the 7 years all over again.

  23. EMS says:

    I receive constant calls from a medical collection agency. I spoke to them once and asked them to send me verification of the debt which they never did but continually call. I blocked their number. I recently obtained my CR and this company appeared stating that I owe $81.00 and the date of last activity was 2012. Should I contact them by letter or one of the CR agencies? Help!

    • EFX Moderator says:

      EMS, debt collectors are required to send you a written “validation notice” that discloses the name of the creditor to whom you are in debt and what protocol you should follow if you don’t think you owe the money. The debt collector must send you this information within five days of your initial communication.

      If you don’t want to receive further communication from the debt collector, you must send a letter requesting that the contact stop.


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