Can Paying off Collections Raise Your Credit Score?

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If you've ever received a phone call or a letter from a debt collector, you know it can be stressful. Debt collectors attempt to collect money owed to a landlord, medical service provider or some other creditor. And while paying or settling your collection accounts may certainly look better to future lenders, there's no guarantee your credit scores will improve as a result.

What Are Collection Accounts?

A collection account is an entry on your credit report that indicates default on a previous obligation. The original creditor either sold the defaulted debt to a debt buyer or consigned the debt to a collection agency. The goal of the collector, not surprisingly, is to work on behalf of its client to collect the defaulted debt from the debtor, or as much of it as possible.

Collection accounts often are reported to the credit reporting agencies, and are allowed to remain on credit reports for up to seven years from the original debt's first delinquency date, per the Fair Credit Reporting Act (FCRA).

How Do Collections Affect Credit?

Collection accounts are considered by both FICO®'s and VantageScore's credit scoring systems and can be highly influential to your credit scores. Collections fall under payment history, which is the biggest factor in your FICO® Score calculation, driving 35% of your score. Consumers with collections on their credit reports are likely to have lower credit scores than consumers who have no collections.

In addition to the potential impact to your credit scores, the presence of collections also can influence lender decisions. For example, Fannie Mae, which provides financing to mortgage lenders, has several policies requiring that collections be paid off prior to you closing on a mortgage loan.

It's always a good idea to pay collection debts you legitimately owe. Paying or settling collections will end the harassing phone calls and collection letters, and it will prevent the debt collector from suing you. The debt collector will then update your credit reports to show the collection account now has a zero balance.

While it's natural to assume that paying or settling a collection account will lead to a higher credit score, this is not always the case. As with most questions regarding credit scores, the answer to whether paying a collection will be helpful is: "It depends."

Will My Credit Improve if I Pay My Collection Account?

Newer credit scoring models ignore collections that have a zero balance. This is true for both the most recent version of FICO®'s credit score, FICO® 9, and the two newest versions of the VantageScore® credit score, 3.0 and 4.0.

When you pay or settle a collection and it is updated to reflect the zero balance on your credit reports, your FICO® 9 and VantageScore 3.0 and 4.0 scores may improve. However, because older scoring models do not ignore paid collections, scores generated by these older models will not improve.

This is important because some lenders, especially mortgage lenders, use older versions of the credit scoring models. This means despite it being a good idea to pay or settle your collections, a higher credit score may not be the result. If you do choose to pay or settle your collections, it is a good idea to see how it impacts your credit scores. You can check your FICO® Score from Experian for free.

Keep in mind that the FICO® Score currently available from Experian is the FICO® 8 version, which does not ignore paid collections. This is a good measuring stick because if you've got a solid FICO® 8 Score even after paying your collections, it's likely that your FICO® 9 and VantageScore 3.0 and 4.0 credit scores will be equally strong, or even better.

Can You Remove Paid Collections From Your Credit Report?

While the FCRA allows collections to be reported for up to seven years, there is no requirement that a debt collector or a credit reporting agency remove a collection simply because it has been paid.

If, however, you believe you have a collection account on your credit report that is incorrect, then you have the right to dispute that information with the credit bureau and have it corrected or removed if it is proved to be inaccurate. This right applies to collections and other items on your credit reports you believe are incorrect.

If you have a verified collection account on your credit report, it will not be removed until it naturally falls off after seven years. You can add a 100- to 200-word consumer statement to your credit reports explaining the collection, though this is not always recommended.

How to Improve Your Credit Scores After a Collection

The good news about collection accounts on your credit reports? As they age, they count less toward your credit scores. And even while you have a collection or collections on your credit reports, there are many other ways to improve your credit scores.

The best way to start improving your credit score is to prevent new derogatory information from appearing on your credit reports. You can achieve this by making all of your debt payments on time, without exception. If your bills are paid on time, your debts will never go into default and there will never be a need for a debt collector to get involved.

Ensuring that your credit card debt is as low as possible is another great way to improve your credit scores. Credit scoring models consider your credit utilization ratio, or amount of credit card balances relative to total credit limits, when calculating your scores. Maintaining low balances ensures a low utilization ratio, which can improve credit scores.

Finally, don't apply for credit unless you need it. Each time you do so, the lender will likely pull one, if not more, of your credit reports. This will result in a hard inquiry on your reports, which can lower your scores temporarily. And while inquiries are the least influential factor in your credit scores, they can still be a red flag to lenders.

The Bottom Line

Most negative credit information, including collections, must eventually be removed from your credit reports as a matter of law. It's in your best interest, however, to pay or settle the debt as quickly as possible. Remember, newer credit scoring models ignore zero-balance collections, while older scoring models do not.

If you want to check collection balances, or you don't know what's on your credit reports, you can access a free copy of each of your credit reports from the three major credit bureaus (Experian, TransUnion and Equifax) once a year at You can also check your Experian credit report every 30 days for free.