How Many Points Does Moving a Collections Account Count Towards My Credit Score?

Collection accounts are considered part of your payment history by credit scoring formulas. Payments are a heavily weighted area that makes up 35 percent of your overall score, according to Fair Isaac, a leading credit score provider. Your score goes up significantly if you move collection accounts off your Experian, Equifax and TransUnion credit reports because they no longer count toward your score.

Definition

A collections account is a delinquent bill that was turned over to a debt collector. Some lenders hire collectors, while others stop internal collection efforts and charge off unpaid accounts after about 180 days. The old accounts are then sold to outside collection agencies. Your original past-due account stays on your credit reports with the three credit bureaus, and the debt collector typically adds an entry showing the collection account.

Effect

Collection accounts, like other past due bills, lower your credit score between 70 and 120 points, depending on the other data on your credit reports, according to the Electronic Privacy Information Center. Your credit score runs between 850 and 300, and a significant point deduction can drop you into the sub-prime range if your score is already borderline. A low score means lenders charge you high interest rates because you are a risky borrower or reject your applications.

Moving Collections Accounts

You can sometimes move collections accounts off your credit reports if there are errors in the data. Debt collectors sometimes have incomplete records and report incorrect dates, account balances or other bad information to Experian, Equifax and TransUnion. You can catch this by ordering free credit reports through AnnualCreditReport.com, which provides them once a year without any catches, according to the Federal Trade Commission. Complain to the credit bureaus about any mistakes you notice in the collection entries, and in any other negative items, via their online dispute forms. They must investigate and respond to you within 30 days, and they remove any entries they cannot verify within that time period. Your credit score goes up as soon as the collections accounts are gone.

Settling Collections Accounts

You can move a collections account off your credit report by settling if the debt collector agrees. Offer a lump sum amount of less than what you actually owe. Collection agencies often agree to give discounts if you pay a lump sum because they pay very little for bad debts. You might end up paying as little as half, according to Bankrate writer Lucy Lazarony. Get an agreement from the agency to remove its entry from all three of your credit reports as part of your settlement, and confirm the details in writing. You regain your lost credit score points once the collection agency cleans its entry off your reports.