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Question By
EA23

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Does paying off my collection debt help boost my Credit?

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Yes.  But, since it took a while for it to go to collections (late/missed payments, maybe) it may take a little bit for the score to go up unless you can negotiate a pay for delete agreement.  That topic is covered in the articles here.

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Yes it does..  I had 3 items in collections and finally woke up and paid them off and my credite score has jumped up.  DO NOT deal with them by saying you will take the shoter route in paying them off because it will show that it was not paid in full so pay the full price off without them handing you a deal to pay less.

Reply by
BreeziB

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It is in your best interest to, YES ask for a settlement. There is no reason to pay the account balance in full when you know they are willing to settle if for less as the balance includes interest, fees and charges which are way above the amount of debt that was even borrowed.

A few years ago FICO changed its scoring algoritims to show that accounts reported in collection that have been paid in full or settled will be removed from the scoring calculations, no longer negatively impacting your score for years to come. These accounts may still remain on your credit file, unless the creditor agrees to remove them altogether as part of a repayment agreement, but they will no longer count against you in the calculation of your FICO score.

Therefore it would be a waste of your money to pay the account in full balance if they are willing to do a settlement.

*I am an IAPDA Certified Credit Counselor*

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Continue

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Also, even if you negotiate a settlement or pay it in full, it will still stay on your credit report to reflect positive information.  Most companies start the 7 year period from the last activity date of the account so the sooner you pay it off the less of negative time will affect your CBR, but try to do it before it reports collections on the report. I use to get these calls at lot when i worked in 3rd party collections, once you pay it comes off, THIS IS NOT TRUE, cause it must reflect the positive time.   Its best to read over your contractual agreement to find out when the original credit will put an account in collections or how many days past due due the send it or sell it to a 3rd party agency.  From my experience in banking, most companies sell the debt off once it becomes around 120 days past due, if not that far past due it will only stay at in-house collections.

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Follow Up Question

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Hi,  I cam to this forum to ask the same question,  this thread has been helpful and I found another thread from 2015 here discussing this too.  Now I a have questions. 

I had two accounts go into collections - 1 was a utility bill that kept an active billing period I believe after I notified them I was moving and needed to close the account, 4 years old.  The other is a credit card I maxed out, also I think 4 years old. 

Both companies sold my debt to a collection agency, it 's the collection agencies that were calling me for a couple years after.  I haven't heard from either of them for a couple of years, but they're still reporting the cases as open to the bureaus.  

So my questions is this:

If the original lender sold to a thrid party without notifying me at the time of selling my debt,  does third party have right ot collect?  II don't want to dispute and have them come back wit hlegal grounds to collect and take me to court or something.  Would it be safer to call them and settle? 

Reply by
CKisCool

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I cannot give you legal advise but i can tell you what happened to me. I had an account go into collections and a few days ago i was given a notice that i was being sued by the collections agency. I called and negotiated a settlement to avoid having to go to court etc. I have been trying to bring my credit up so it wasnt that big of a deal for me since ive been closing all my accounts which negatively effect my credit.

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Yes & No

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It could help boost your score with time.  Once you payoff a charged off account or an account that is in collection, that start the 7 year period for it to reflect positive information.  So, the main thing that will affect you about that account at this point is the history of the account, which is the negative part, but as time goes and you continue to build good credit it will not affect you as much.  

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Negotiations

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Your last sentence stated that the topic is covered is covered in the articles here.  Could you direct me to the articles?

Reply by
CreditChecker28

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I think I found a couple of those articles he mentioned:

https://www.creditkarma.com/article/accounts-in-collections

https://www.creditkarma.com/article/what-is-a-delinquent-account

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pay off

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 paying off my collection debt. does the 7 year time start over from that date or does it still come off the report from the first time being late

Reply by
Hcubbyhill19

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 The 7 year clock resets as soon as you make one payment.

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Settlement

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I worked out a settlement with a creditor and paid the amount agreed upon. However, the leftover balance is still on my account as collections. What do i need to do to have it removed?

Reply by
KMART101

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File a dispute with Trans Uniion or Equifax. Credit Karma: My overview\Dispute Center. It may take up to 30 days to get removed.

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Charge-off

Had a charge off...with auto financial. ..but. I just paid in full...Will this negative information. be remove for my report ..once they report it or I will send the credit bureau the letter stating "paid in full"?

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In my situation I paid amount in full and creditor agreed to remove from my credit report. I also requested written confirmation and sent it to the 3 major credit bureaus and it was removed in about 2 weeks and my score went up significantly. Once you make a payment you can also dispute through credit karma and they will remove or close the account.

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