Credit Myth 1 – Paying Collections

Credit Myth 1 - Pay Collections

Credit Myth 1 – Pay Collections


The following guest blog is written by Teressa McIntosh with HOPE Credit Service.


Paying collection accounts is usually the first place people start when deciding to try to fix a damaged credit report. However, the idea that paying off a collection account will boost a consumer’s credit scores is, unfortunately, very wrong. The FICO credit scoring model was built to help lenders predict the likelihood of a borrower going 90+ days past due on a loan within the next 2 years. If a borrower is likely to go 90+ days delinquent on an account within the next 2 years then a lender will probably consider the borrower to be a bad credit risk.

When a consumer pays off an outstanding collection account, even if a zero balance is reported to the credit bureaus, that does not erase the fact that the delinquency occurred in the first place. Therefore, the FICO scoring model still sees the consumer as a bad credit risk. It is the occurrence of the delinquency (aka the late payment) which lowers the consumer’s FICO scores, not the balance on the collection account. The fact that the delinquency happened is not erased when a collection account is paid. To further illustrate this point, let me ask you a question. Would a $1,000 credit card collection, a $100 credit card collection, or a $0 credit card collection lower your credit scores more? If you guessed that the 3 collection accounts would have the same impact upon your credit scores then you guessed right!

Additionally, if a paid collection account is illegally re-aged upon payment (an error which occurs commonly on credit reports), then the collection account would remain on your credit report even longer, damaging your credit scores longer than legally allowable, since the 7 year statute of limitations was manipulated. However, you do want to exercise caution when it comes to collections. If you have a collection account on your report which you know stems from a real financial obligation and you know that the balance is correct, then it may still be in your best interest to try to settle the debt. Unpaid debt can potentially result in being sued, wage garnishment, and judgments. Remember, if you owe a collection account, you can always try to settle it for a lesser amount and you can even hire a reputable professional to assist you in getting a better deal. Paying 100% of the collection will not affect your credit scores any more positively than paying a 50% settlement in full. Neither scenario removes the collection account from your report, so do yourself a big favor and save yourself some money if you choose to settle any collection accounts.

Finally, it is very important to always, always, ALWAYS get proof of the settlement and the satisfaction of the account in writing from the collection agency.


You have the right to try to employ some of these strategies on your own, though doing so will likely be time consuming and very difficult. You also have the right to hire a credit expert to assist you. If you would like to speak with a HOPE Credit Expert regarding your credit report please give us a call at (678) 383-2839 or visit us at 5041 Dallas Hwy, Suite 508 Powder Springs GA 30127. We look forward to serving you soon click here to schedule a credit analysis today.

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