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If I pay off a collection account will my credit score improve?
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Question By
itsyorkie

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I called a collection company this morning that I paid off in april to ask how long would it take to reflect on my credit she told me that the collectoion agency sends out a letter after the debt has been paid off to take to the company that was owed and then it should reflect almost imediatley after.

Response by
successfulon

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The Catch-22 Advantage
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ome / Questions About Credit? Find Your Answer at the Creditnet Learning Center / Understanding Debt Settlement / The Catch-22 Advantage

The Catch-22 Advantage

When you think about it, our credit reporting system provides little incentive for you to pay off your debt. If you ignore the debt long enough, you stand a good chance of never hearing from the creditor again. Seven years after the debt is written off, the negative listing disappears from your report altogether. But if you pay the debt sometime before the end of that period, the seven year cycle starts all over again— not exactly what one would call an incentive. It's like getting time added to your sentence for good behavior.

Fortunately, creditors make their money by collecting the debts, not by reporting negative credit information. Creditors recognize this catch-22, and are therefore often willing to delete the negative listing upon settlement. If you are going to settle with a creditor, be sure to negotiate removal of the listing from your report.

Collection agencies are always more agreeable to delete a negative listing than are banks or credit card issuers. The only time you might run into problems is when the collection agency represents a large institutionalized creditor. Many creditors have an agreement with the credit bureaus that they will not allow a negative listing to be deleted upon settlement. Larger creditors such as the credit card giants or banks will require considerably more pressure before they give in to your demand. Virtually every creditor will succumb given the right amount of convincing.

Every creditor who reports to the credit bureaus can also change the information they report. In most credit organizations, there are dozens of people with the authority to make changes on the credit report. Anything a creditor reports, a creditor can change.

There are two ways you can approach deletion of negative information in response to settling a debt with a creditor: pre-notification of terms, and post-notification of terms.

Pre-notification of Terms

In this scenario, you tell the creditor up-front that you require the deletion of the entire negative listing as a part of the payoff. Definitely obtain this agreement in writing before the payoff takes place.

Advantage: You will save yourself time and frustration. There is also less of a chance that you will have to fight the creditor later to actually delete the negative listing.

Disadvantage: If the creditor discovers that your credit is important to you, they may change their mind and demand a larger settlement amount— sometimes as much as the full balance.

Post-notification of Terms

Once you have concluded your negotiations with the creditor, you include a "conditional endorsement" document with your settlement check. This document, which should be drafted by your attorney, informs the creditor of your terms for settlement. In your case you will insist that you are settling the debt on the condition the creditor delete your negative listing.

Advantage: Most of the time you will get a more favorable settlement amount this way. The creditor is often sufficiently tempted by the payoff that they deposit the check without blinking at the new terms.

Disadvantage: The creditor could reject your terms and return the check to you. Subsequently, the creditor might ask for more money or re-neg on the deal altogether. In the worse case the creditor deposits the check without following through with your demand. You will then have to fight the creditor later and force them to delete the listing.

Never expect a creditor to meet a verbal agreement. Document everything in writing, no matter how "good" you feel about the representative you speak to. You will likely have to fight the creditor to get them to live up to their end of the bargain, even when you have written documentation.

You may find that some creditors refuse to agree to a deletion under any circumstance. Yet every creditor will eventually agree to your terms if you speak to the right person or hold off long enough. But if you are on a time-line and your attorney is unable to obtain an agreement for full deletion, there are a couple of other options you have.

List Account as PAID

You may counter-offer that the creditor list the account as "Paid" rather than delete the item. After all, this would be an accurate indication of the status of the account and many creditors agree to this wording. Note that a "Paid" status is still very negative for a collection account. You should only agree that the account show "Paid" if all other negative notations are deleted. These notations include charge-offs, repossessions, late notations, and collections. A simple "Paid" notation on a regular trade line is neutral and should not impact your credit negatively.

List Account as SETTLED

Another option is to have the negative item listed as "Settled". While this is an inherently negative listing, it is not as negative as "Paid charge-off." Don't agree to a "Settled" listing until you have exhausted all other possibilities. Because "Settled" still triggers a credit denial, you should only agree on this type of listing if all other negative notations are removed. These notations include charge-offs, repossessions, late notations, and collections. If you agree to a "Settled" notation, you must continue to work hard to delete the notation through the credit bureau dispute process.

List Account as PAID CHARGE-OFF/PAID COLLECTION/PAID LATE

Finally, you can counter-offer to list the account as one of these. Note that this will be the creditor's first choice, and should be your absolute last. These notations are almost as damaging as showing "Unpaid" status. It is not unusual for an account to be deleted through credit bureau disputes once it has been paid. The creditor then has no compelling reason to keep the negative listing on your report. For this reason, it is still usually a good idea to settle even when the creditor will not budge on deleting or positively modifying the negative listing.

Response by
AFLC

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I have a bill in collection and a bill that was paid. Should I call the company to have it removed from my credit score??

Response by
beachparty256

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you need to call the 3 major credit bureau and dispute it, if it still in your credit report! it is very important to review our credit report every year and look at all the descrepancies.

Reply by
mslefty2196

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It wouldn't hurt.  But rather than call, send a certified letter for the request.  Paying the extra postage for certification will show that you are serious about getting it removed.

Also, make sure you copy your letter.  That way you have a record of everything.

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Reply by
rabidhunter

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I'm not sure about the certified letter. I've heard that it usually back-fires.

Reply by
patnapier

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I was wondering this myself as I have started to knock off some of my debt that was in collections late last month.

Response by
MzKay856

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My score has definately increased by having old accounts paid and deleted.  This is how I got several items cleaned up, first, I disputed just about everything on my report.  I was surprised how much fell off just by disputing.  Including a Sprint bill from 2009. Some old hospital bills, etc.  Then I paid all I could.  After I paid, I disputed again.  My experience has been once a collection agency has been paid in full they will not bother to respond to a dispute.  Then it automatically falls off.  My score has increased about 70-80 points. I have not yet been approved for new credit but after one attempt and denial, I decided to wait until I finish paying and disputing.  Trying to save myself the hard inquiries until I am failry certain I can get approved.   Good luck.  My journey started in Sept. 

Reply by
mistytanner

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How to dispute? I am really naive on this. I had few deregatory accounts. I paid/setteled them. It's been more thatn a year I did that. But I think they are still hampering my score. Is there any way I can make them go away from my account? Also, I have one deregatory account where I am making small payments every month. I still need to pay for 10 more months. Should I pay the rest in one go? Should I file any dispute after making the payment?

Reply by
debkumar

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Pay off and then file a dispute with all the credit score agencies. Once the collection is paid they will remove it from your report. However, the original account that went to collections will remain as negative on your report (if it was showing up on your report in the first place). Having one negative account is way better than having two even if they are both there for the same reason. If the original account was not reported (like my gym membership) than after the collection account is deleted noone will ever know if something bad happend to you.

Reply by
VRoman0

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where did u do this at because i have one in collections and i wat it get it off but do not know the proper place to do so

Reply by
alanaa3

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$20 bucks for their proprietary "technology".  Use the score simulator instead. It's free!

Reply by
Dipster

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what types of reason did you use to dispute your items

Reply by
CandiceChipps85

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What?

Reply by
sadie7

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The collection companies can change how they are listed on your report. From what I understand, the best way to do this is to negociate it BEFORE you pay them off. Do it all in writing, negociate the payoff amount and also ask that they change the status of the account to something more positive once it's paid.

Reply by
jhr4434

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i disagree i paid off all collection accounts and they are still on there even talked to collection agencies if they would remove it they said they cant do that

Reply by
baybbug2

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go to www.annualcreditreport.com you get one free credit report each year it list whats on your report you can find the numbers to the collection agencies you owe and you can call and set up payments on what you owe im not sure but you might can get them to report your ontime payments on your debts to the credit burues remember with any ontime payment its not building your score if its not being reported so be careful who you get loans with some will report and some will refuse to

Reply by
krazykarl24

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hi i would love to know the process of you how to doing it ? i were doing some of your advice and i get a lil bit improve in my credit report......looking forward to heard from u

Reply by
nicholasyud

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That's great advice.  Thank you.

Reply by
veedwards

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this makes no freaking sense.  You lost me during the third loops in your response

Reply by
luis1247

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Your advice is about the best i've heard. I am working on my collection accounts now. Thank You

Reply by
hawkcarter

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contact ERC 1-800-586-0013 - this agency had my NEXTEL/SPRINT account from 2008.

Reply by
msafif2942

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 Can I ask you question on the Sprint  bill?

I had an sprint bill as well and many  folks around me did  also. When  they had cange over form Nextel I had never recvied any notice nor  could I had locate them to pay off the bill.  I had since been contacted by an collection company and paid it off. I was  just wondering if any one else had hard time findig out to who to pay the bill too as well ?

Reply by
bleacherbrat

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I have learned plenty from this site but one thing in regards to your question is you should pay slightly more then the minimum on any and every account you have. This reflects very positively on your credit! You should aslo pay off entirely any account you can as soon as you can starting with the one that is charging you the most in interest! These practices will save you tons of money and a headache or two!

Reply by
BetterLife4me

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By paying off collections older than 2 years your score will drop.

Positive Credit or lack of positive credit has as much or more impact on a credit score. Now that point deduction technology is finally available to consumers we are able to increase and maintain our credit scores in a short period of time.

Point Deduction Technology is a software program designed to analyze your credit data. Credit scores range from 350 to 850 leaving the possibility of capturing up to 500 points.

The software recognizes many factors used in credit scoring and assigns a point deduction number per item on a credit report. The assigned numbers will range from 0 to 100+ depending on the type of accounts reported.

The analysis separates the short term and long term point deductions, posting recommendations to recover the necessary points to increase a credit score.

www,ScoreNavigator.com analyzes a borrower's total credit picture based on the data reported by the bureaus. The combination of a borrower's total credit picture as well as each individual item are factors in determining the score impact of each individual item on a report. ScoreNavigator determines with 92% accuracy the point impact of each trade line on a credit report, whether positive or negative.www.scorenavigator.com

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Reply by
sheepdog21

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Go to www.crednology.com

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Reply by
sheepdog21

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 i have a collection on my report for 70.00 dollars from a medical bill, i want to pay it off but i think if did i wpuld drop my already poor score of 610 what should i do i am trying to improve my score to get a house

Response by
bajanqueen

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By law after you pay the collection agency they have thirty days to remove it from your credit report. If they don't contest it & send a copy of your check to credit agencies.

Response by
msbunny413

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You can always negotiate with the company to remove the collection but you must get them to send it in writing and then once you get the letter of the agreement you can pay the collection. IT WORKS I JUST DID IT FOR MY HUSBANDS CREDIT REPORT.

Reply by
Loren19

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That's a misconception. Based on the Fair Debit Collection Act a debit collector is not required to remove anything from your report that is true. 

So if you had a collection but paid it off, they can leave it on your credit report by noting it as "PAID" or "PAID, AS AGREES" etc.

What you really need to do is get an agreement in writing before you make any payment. Remember that collection companies usually pay pennies on the dollar for your accounts. This being said collection companies are typically willing to settle for 25-50% of the actual debit. So you truly have the upper hand. Also, most states have a Statute of limitations on a debit. Check to see if the debit is even still valid before you do anything.

The key is get everything in writing. I wouldn't even bother speaking with them over the phone.

I found a great resource for from letters to send collection agencies here:

http://www.creditinfocenter.com/forms/sampleletter6.shtml

Reply by
fjm0606

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After you pay the collection agency they have thirty days to remove it? or is it... I have to pay within 30 days of when the account was opened and then they can remove it...Because I just tried to get my account removed..The account was opened 5/26/2010 and they told me I had til 6/26/2010 to pay and have it removed..I paid 7/12/2010.

Reply by
Lerie468

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Positive Credit or lack of positive credit has as much or more impact on a credit score. Now that point deduction technology is finally available to consumers we are able to increase and maintain our credit scores in a short period of time.

Point Deduction Technology is a software program designed to analyze your credit data. Credit scores range from 350 to 850 leaving the possibility of capturing up to 500 points.

The software recognizes many factors used in credit scoring and assigns a point deduction number per item on a credit report. The assigned numbers will range from 0 to 100+ depending on the type of accounts reported.

The analysis separates the short term and long term point deductions, posting recommendations to recover the necessary points to increase a credit score.

www,ScoreNavigator.com analyzes a borrower's total credit picture based on the data reported by the bureaus. The combination of a borrower's total credit picture as well as each individual item are factors in determining the score impact of each individual item on a report. ScoreNavigator determines with 92% accuracy the point impact of each trade line on a credit report, whether positive or negative.

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Response by
sheepdog21

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Yes, mine went up 50 points when my collections were disputed.

Response by
longhorn0

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When making payments?

So if i make payments to the collection agency monthly on time, how much does it affect my credit score does it help it go up? since i am making monthly payments and it is a medical bill acctually.

Response by
tmorales6475

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stick to your guns

For those of you who paid off old collections and they have not removed them, I had the same issues.  They verbally agreed to delete from my credit report however only updated the account was paid or settled.  I stayed on them and called as often as I can to coerse them into deleting them completely from my credit.  Once a debt is paid, the collector cannot call you or contact you for any reason unless they have other debts in collection for you.  I reversed harrassed them, calling daily to inquire when and if they will remove it from my credit. They all got tired of me calling in and finally agreed to remove the accounts from my credit history.  The ones that refused to provide a letter showing they requested it to be removed I had experian call them with me on the phone and confirm they agreed to remove the debt completely.  When that was done, Experian had it removed by the end of the business day and no longer showing it at all.  I had over 9 old medical collections deleted and now am working on student loans that were sold or the company closed.  My score was 571 and I will check in a while with experian to see what it will be now that the collections have been deleted.  I also applied and was approved for a credit card from Capitol One, just a lame little $200 limit secured card to start showing some payment history on my credit.  I was advised to keep my charges lower than 30% and pay them off a day before the bill is due and not to touch them again until after the date each month that company reports to the bureaus. It has also be said to keep a balance owed of a low amount, such as $1.00 or so, then pay it on the next bill to show that I am keeping a line of credit open and i appear more valuable to a creditor.  It seems they would prefer to have people who have small balances with credit cards for a higher score than those who pay everything off in full.  We shall see.  

Response by
HerMileHighness5280

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