Aug
16
2013

The impact of paying a collection account on credit scores

Dear Experian,

Does settling a debt that is showing negative on my credit report as a “collection”, get removed from my report as soon as it is paid? Does paying this debt help raise my credit score?

- ONY

 

Dear ONY,

A paid collection isn’t removed immediately from your credit report. The important thing to remember is that your credit report is a history of how you have managed your credit over time. That history will include both the good and bad.

The good news is that the negative information will not remain forever. Negative information, including collection accounts, is deleted seven years from the original delinquency date. The original delinquency date is the date reported for the first missed payment on the debt.. That date carries over from the first account to the collection account, so both accounts will be deleted at the same time.

Paying the debt won’t necessarily help your credit scores. Accounts that get to the collection stage are about as negative as it gets. Only bankruptcy is worse. As a result, any improvement, especially right away, probably will be very minor.

However, that doesn’t mean there is no benefit to paying the debt. Doing so will reduce the total amount of debt you owe. As a result, a paid collection account will be better in lenders’ eyes than an unpaid account, even if only slightly so. The important thing will be what your payment history is like after the account is paid.

Lenders are looking for a pattern of positive credit management. The longer you have paid your other bills on time, and the further in the past the collection account was paid, the more positive your credit history becomes.

Although paying the debt probably won’t make a significant change right away, it will help you rebuild your credit history faster.

Thanks for asking.

- The “Ask Experian” team

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