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.
Let's Summarize... If you're facing debt collection, it's important to understand how the process works and what options you have. If you ignore a debt in collections, you can be sued and have your bank account or wages garnished or may even lose property like your home. You'll also hurt your credit score.
If you don't pay off a debt in collections, in the best-case scenario, you'll have your credit score dinged for seven years and continue to be contacted by collectors until the debt falls off. The best-case scenario is only likely if your debt is too small to be worth the collection company's time.
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.
Assuming the collection information is accurate, the collection account can stay on your reports for up to seven years plus 180 days from the date the account first became past due.
Admitting liability. Even if you know that you owe the debt, you want to avoid making statements, such as “I know that I owe this bill.” You could still have defenses, especially if the creditor you owed the debt to sold your account to a third party. You do not want your words to be used against you later.
Ignoring Debt Collectors Can Lead to a Debt Collection Lawsuit. Worst-case scenario: They can file a lawsuit against you. Debt buyers may also sue you. Once a creditor or debt collection agency files a lawsuit, it's even riskier to continue ignoring it.
Beyond contacting you directly, they can take you to court and sue for what you owe them. If they win—or you don't show up in court—they may be able to take money from your bank account, garnish your wages or place a lien on your property. After a certain period, debt collectors lose the right to sue you in court.
If you receive a notice from a debt collector, it's important to respond as soon as possible—even if you do not owe the debt—because otherwise the collector may continue trying to collect the debt, report negative information to credit reporting companies, and even sue you.
The Fair Debt Collection Practices Act (FDCPA) prohibits debt collectors from using abusive, unfair, or deceptive practices to collect debts from you, including: Misrepresenting the nature of the debt, including the amount owed. Falsely claiming that the person contacting you is an attorney.
A debt doesn't generally expire or disappear until its paid, but in many states, there may be a time limit on how long creditors or debt collectors can use legal action to collect a debt.
Your original creditor may be most willing to take your debt back if you have already worked out a plan with your debt collector and begun repaying what you owe. So, if you want to bypass a debt collector, contact your original creditor's customer service department and request a payment plan.
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.
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.
According to the Fair Credit Reporting Act (FCRA), negative items can appear on your credit report for up to 7 years (and possibly more). These include items such as debt collections and late payments. The time frame begins from the original date of the delinquency (the date of the missed payment).
Unfortunately, a debt in collections is one of the most serious negative items that can appear on credit reports because it means the original creditor has written off the debt completely. So when a debt is sent to collections, it can have a severe impact on your credit scores.
If you are struggling with debt and debt collectors, Farmer & Morris Law, PLLC can help. As soon as you use the 11-word phrase “please cease and desist all calls and contact with me immediately” to stop the harassment, call us for a free consultation about what you can do to resolve your debt problems for good.
The 7-in-7 rule: Reg F stipulates that there may be no more than seven (7) calls made by a debt collector to a consumer in a span of seven (7) days.
All told, it's really not a great thing to let your debt get to the point where it's gone into collections. If you're able to reach out to your original creditor and work out a payment plan first, you'll generally be in a better position.
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.
Although the debt won't be factored into your credit score after seven years, there are still consequences. When you stop paying your debt, the creditor will start charging late fees and interest will continue to accumulate, increasing the balance you owe.
Paying off collections could increase scores from the latest credit scoring models, but if your lender uses an older version, your score might not change. Regardless of whether it will raise your score quickly, paying off collection accounts is usually a good idea.