text: Current accounts in good standing are not turned over to collections. For your account to wind up in collections, it must be past due, have missed payments, or otherwise be delinquent. Any kind of delinquency on your account can put negative marks on your credit report and unfortunately, simply making a payment to bring your account current does not erase the fact that your account was delinquent and reported to credit reported agencies as such. Negative marks, such as those from missing payments, can take up to seven years to fall off your credit report.
  Collections are reported to credit reporting agencies as payment history, a category that makes up thirty-five percent of your credit score. Therefore, having an account go to collections can affect your credit score by over one hundred points, which is enough to drop a fair credit score too poor. This mark on your credit report can deter potential lenders from working with you in the future because it shows that you are unreliable and may not repay the money loaned to you. Having a low credit score and negative marks on your credit report can also affect the repayment terms and interest rates with those lenders who decide to take a risk on you. Additionally, poor credit can affect your ability to take out student loans, your housing options, and it can even limit your employment opportunities.
  Paying off collections does not improve your credit score. However, there are new credit scoring models, such as FICO’s newest model, that ignore collections accounts with a zero balance. All lenders use different scores, though so while one model may not reflect your account that went to collections because you paid it off, other models will have a lower credit score due to the collections account and there is no way to control which model your lender will use in checking your credit.
  While paying off collections generally does not have an immediate positive impact on your credit score, it does prevent further damage and set you on the right path toward rebounding your credit. By paying off collections, you will avoid the added headache of litigation as accounts that are not paid off in collections typically end up in a lawsuit for unpaid dues. Additionally, if you can pay off the account in full, you will avoid accruing additional interest and fees which can drive up your monthly payment and put you at risk for more missed or late payments in the future. Finally, while your credit score may not immediately improve, the fact that your account has been paid or settled will be reported which can impact lenders’ decisions to work with you in the future.
  So, if paying off collections does not improve your credit score, what are your options for recovering from those negative marks on your report? Here are a few ways to improve your credit score after dealing with a financial setback.
  1. A Delete Letter
  You can ask for the collection agency or lender to remove the collections mark. You can submit a delete letter or a written request for the negative marks reported to credit reporting agencies to be removed in exchange for your payment on the account. Typically, this requires some money from you as collection agencies are contracted to collect payment on behalf of the original creditor or lender and profit by receiving a percentage of the amount collected. Therefore, you may need to incentivize the collection agency by paying more than the agency was paid for your debt.
  2. A Goodwill Deletion
  Things happen and sometimes those things make it hard to pay the bills. If you have good credit history, but for this one blemished account, your creditor may be willing to remove the associated negative marks from your credit report through a goodwill deletion. Generally, creditors want to help you out if it benefits them, so especially if you are a long-term client with an otherwise good history with them. Therefore, you can submit a letter highlighting the duration of your relationship in good standing with the creditor, explain that you intend to keep your account in good standing and that the delinquency on this account was a one-time incident due to an unavoidable hardship. Many creditors will give you one goodwill deletion if you have a proven, positive track record with them.
  3. A Collections Dispute
  Sometimes, items on your credit report are invalid. Inaccurate, unfair, or unsubstantiated marks on your credit report can be disputed with the credit bureaus, with your creditors directly, or with the collection agency. Disputed marks that cannot be verified should be removed from your report which will improve your credit score. Therefore, it is important to review your credit report frequently. Any errors, including wrong dates, misspelled names, and incorrect balances, should be disputed in writing with the collection agency. If the collection agency cannot validate the disputed information, the debt should be removed from your credit report.
  Dealing with collections agencies can be intimidating. However, it is important to remember that there are laws in place to protect you, as the consumer. Under the Fair Debt Collection Practices Act (FDCPA), collection agencies are limited in how they contact you, when they contact you, and what they can say to you in attempting to collect a debt. If a collection agency violates your rights, you can report them to the Attorney General’s office, the Federal Trade Commission, and you may even work with an attorney to have the debt invalidated due to the collection agency’s violation of your rights.
  The best thing you can do to improve your credit score is to stay on top of your payments. If you experience a financial hardship that impedes your ability to keep your account current, contact your creditors to discuss your options for delaying payment, changing a due date, or making other changes to ensure your account does not become delinquent.