Credit Report & Scores » Report Advice » Collections » Is it best to pay collection accounts in full or negotiate for less than you originally agreed?

Is it best to pay collection accounts in full or negotiate for less than you originally agreed?

Whenever possible, it’s best to pay a collection account balance in full.

Once the entire collection account balance has been paid, the status of the account will be updated to “paid” in your credit report Having a paid collection account is viewed more favorably by lenders than an unpaid or “settled” collection account. The term “settle” refers to negotiating repayment of a debt for less than originally agreed under the terms of the contract.

Many of the newest credit scoring systems don’t include paid collections in the calculations. Although the collection account will remain on your credit report, it will no longer affect your credit scores and can have an immediate positive impact on your scores.

If you are unable pay the collection account in full and need to negotiate or settle for less than you originally agreed, it can still help your financial situation. When you no longer owe that debt, you can focus on improving the rest of your credit history and reducing other debts.

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Scoped on: 4/03/2018