If you’ve had trouble paying one or more bills in the past that ended up in collections, you know it’s had a negative effect on your credit report. When you’re trying to rebuild your credit, you may work to pay back any outstanding debts, including accounts that ended up in collections. How do settled or paid off collections appear on your credit report?
Will Paying Off a Collections Account Improve Your Credit Score?
It might seem like paying off an account that was in collections could help increase your credit score, but it doesn’t affect it. Within a month or two of paying the collections account off, you’ll see it reported as paid on your credit report, but it still shows as a negative mark. Paying off an old debt doesn’t erase the fact that at one time, you didn’t pay an account as agreed. This is information that a potential creditor wants to know.
A negative mark such as a collections account remains on your credit report for seven years. The good news is that some lenders will consider a paid collections account to be less serious than one that’s unpaid, and the more time that passes since the account went into collections, the less impact it has on your credit.
How Paying Off a Collections Account Can Help You
Even though the collections account remains on your credit report for a period of time, there are still ways that paying it off can benefit you. You’ll no longer be continually pursued by debt collectors with phone calls or mail, and there won’t be any additional interest or fees added to what you already owe. You don’t have to worry about being taken to court to pay the past due balance or having your wages garnished.
Some lenders will consider the fact that you’ve paid the debt off to be a sign of financial responsibility. Newer scoring models such as FICO 9 ignore collections accounts that have a zero balance.
Can You Have Paid Collections Removed from Your Credit Report?
If the collections account is legitimate, it will remain on your credit report for seven years, and you can’t have it removed just because you paid it off. If there are any collections accounts that aren’t legitimate, or collections accounts reporting a balance even though you’ve paid them off, you should dispute this misinformation with the credit bureau.
Improvement Your Credit with Dovly
Having an account end up in collections doesn’t mean you’ll never be able to obtain credit in the future. Pay down whatever you can and get in the habit of paying your bills on time going forward. If you have any errors on your credit report, dispute it immediately.
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