How Do Collections Affect My Credit Score?

 

You may already know that if a bill goes unpaid for an extended period of time it is possible that the creditor may send the bill to a collections agency.   This will commonly happen once a bill is more than 180 days late and after the creditor/lender has made multiple attempts to collect on the debt themselves.  It’s typically a “last ditch effort” for the creditor to collect payment.

What happens when a bill goes to collections?

First, the creditor likely will have already been reporting the delinquent payments to the credit bureau for several months, so the credit score will already be suffering from all of those “rolling” lates.

Second, when the creditor sells the account to a collection agency, the agency will report that collection to the credit bureaus, resulting in a further decrease in scores.

Now the agency will begin the process of trying to contact and collect on the debt… and they can be pretty persistent.

Should you pay off the collection?

You might assume that if you pay the collection, all will be right in the world and your credit scores will bounce right back.  Unfortunately, this isn’t true.  There are even some cases where paying off a collection could result in scores going down further before they start to go up.

Even if you pay the collection, it does not disappear from your credit report.  It can hang around for up to seven years.

So what should you do if you have collections?

There no one-size-fits-all answer for dealing with collections, but we often have success in getting them removed from our clients’ credit reports.  If you have collections that are weighing down on your credit, let’s talk!  Once we have a chance to look at your credit report and assess the situation, we are able to explain the best course for moving forward.  We offer a free initial consultation so give us a call.