How to Pay Collection Debts Without Hurting Your Credit Score

It is a Catch-22. You got into a bad financial situation and some of your debts went to collections. Now, you're cleaning up your credit and finances, and you want to pay off those old debts. In the past, revisiting collections debts to pay them hurt your credit rating; a recent credit blotch has more weight in your credit score than an old one, and paying an old debt used to bring that debt up as if it were a new problem rather than an old one being resolved. FICO has addressed that.

Instructions

1

Contact the creditor if the original debt is still listed with the creditor. Ask the creditor if you can pay the debt, and if they will drop the original debt from your report. What the creditor says counts more than what the collection agency said. If the debt is in collections, however, the creditor may have already brought the amount due to zero.

2

Negotiate with the collection agency that the agency will drop the charge if you pay. This is known as a pay for delete letter. Ask them to agree in writing in advance. This may work and it may not. Some collection agencies may feel that you are asking them to deceive future creditors by removing the charge. Still, you can ask. There is an example of the pay for delete request letter on the FICO website.

3

Trust the system. FICO has changed the algorithm it uses to determine credit scores to prevent paying off old debts from appearing as new debt, according to Liz Pulliam Weston of MSN Money Central. That does not guarantee that paying old collections will have no adverse affects. But generally, she said, it should have little affect either to help or harm your credit rating.

4

Pay the full amount. Settling with debt collectors is one of the biggest dents you can put in your credit rating. If you plan to pay old debts, pay the whole thing. Some lenders require you pay them before extending further credit.