Paying is often a good idea, not only because you presumably owe the debt they're seeking or even because it will get the bill collectors off your back. There's a chance, if no guarantee, that paying off an account in collections could benefit your credit score.
Your credit score may not increase at all when you pay off collections. However, if your debt is reported using a newer credit scoring model, your score may increase by however many points were impacted by the collections debt. It would also depend on the time passed since getting the negative mark.
Newer credit-scoring models from FICO® and VantageScore (like FICO Score 9 and VantageScore 3.0) ignore zero-balance collection accounts. So paying off a collections account could raise your scores with lenders that use these models.
If you are able to get a pay-for-delete from a collection agency, it may help your credit. But the delinquent account with the original creditor will still remain on your credit report. A collection account paid in full reflects better on your credit report.
Summary: Ultimately, it's better to pay off a debt in full than settle. This will look better on your credit report and help you avoid a lawsuit. If you can't afford to pay off your debt fully, debt settlement is still a good option.
The best way is to pay
Plus, a past-due debt could come back to bite you even if the statute of limitations runs out and you no longer technically owe the bill. While the debt could fall off your credit report, don't plan on ever borrowing from that creditor again.
Debt settlement can eliminate outstanding obligations, but it can negatively impact your credit score. Stronger credit scores may be more significantly impacted by a debt settlement. The best type of debt to settle is a single large obligation that is one to three years past due.
Like other adverse information, collections will remain on your credit report for 7 years. A paid collection account will remain on your credit report for 7 years as well.
A 609 dispute letter is actually not a dispute but is simply a way of requesting that the credit bureaus provide you with certain documentation that substantiates the authenticity of the bureaus' reporting.
You cannot remove collections from your credit report without paying if the information is accurate, but a collection account will fall off your credit report after 7 years whether you pay the balance or not.
It is theoretically possible to get a 700 credit score with a collection account on your credit report. However, it is not common with traditional scoring models. A derogatory mark like a collection account on your credit report can make it incredibly difficult to obtain a good credit score like 700 or over.
Effect on credit scores depends on provider and debt type
However, some scoring models don't continue to penalize you once collections are paid. Paid collections: VantageScore 3.0 and 4.0 do not penalize paid collections, so those scores will be positively affected if you pay a collections account in full.
Why might my credit scores drop after paying off debts? Paying off debt might lower your credit scores if removing the debt affects certain factors such as your credit mix, the length of your credit history or your credit utilization ratio.
With most of the current standard credit scoring models, paying a collection account off likely won't increase your credit score since the item will remain on your credit report. It will show up as “paid” instead of “unpaid,” which might positively influence a lender's opinion.
Generally speaking, negative information such as late or missed payments, accounts that have been sent to collection agencies, accounts not being paid as agreed, or bankruptcies stays on credit reports for approximately seven years.
The truth is that there are no magic words to stop a debt collector from collecting the debt. In case you are wondering what the 11 word phrase to stop debt collectors is supposed to be its “Please cease and desist all calls and contact with me immediately.”
The letter requests an investigation into the disputed information under Section 623 of the Fair Credit Reporting Act (FCRA), aiming to correct errors and ensure the accuracy of the credit report. This process allows individuals to address and rectify any inaccuracies that may impact their creditworthiness.
According to most credit scoring models, paying off a collection account doesn't stop it from having an effect on your credit. You'll usually have to wait until they reach the end of their seven-year reporting window. The good news is that the older the information is, the less impact it should have on your credit.
Customer experience: The company has an A+ rating from the Better Business Bureau, with about 275 customer complaints closed in the past three years. The complaints centered on problems with the product or service, billing and collection issues, and advertising and sales issues.
Yes, you can buy a home after debt settlement. You'll just have to meet the lender's requirements to qualify for a mortgage. Unfortunately, that could be harder after you settle debt.
Best overall: Accredited Debt Relief
It has an outstanding 4.9 rating with Trustpilot (as of January 26, 2024) and an A+ grade with the Better Business Bureau (BBB). Working with Accredited Debt Relief starts with a free phone or online consultation.