There has been a lot of information that’s swirling around on the internet lately, some of it right, some of it wrong, surrounding credit scores. I’m creating this Credit Myths series as a resource for some of the more commonly asked questions about credit scores.
Will paying a collection account raise your credit score?
Paying a collection account can raise your credit score, but the impact depends on the type of debt and how it’s reported.
Under newer credit scoring models like FICO 9 and VantageScore 3.0 and 4.0, paid collection accounts are not factored into your score meaning once you pay off the collection, it no longer hurts your credit. This can lead to a score increase, especially if the collection was the main negative mark on your report.
However many lenders still use older models like FICO 8, which do include paid collections in your score. In these cases, paying a collection may not boost your score immediately, but it still looks better to lenders than an unpaid debt.
Also, some collection agencies may agree to delete the account from your credit report if you pay in full or settle a strategy called “pay for delete.” This can significantly improve your score if successful.
Even if your score doesn’t jump right away, paying off collections can prevent further damage, like lawsuits or additional fees. It also shows future lenders that you take responsibility for your debts, which can work in your favor during credit applications.
To get the biggest impact from paying off a collection account, you need to get the creditor to delete the account completely. If your score is lower than you’d like, you’d probably benefit from a service like this one which lets you keep track of your credit and improve it for you.