Does Paying on a Collection Account Reflect on Your Credit?

According to the Fair Isaac Corporation, collection accounts can negatively affect your credit. If you pay one off, though, it shows as a paid collection on your credit report, changing its date from the past to the date of payment. When you know to whom you should speak and how to pay off a debt that has gone to collections, you can avoid the potentially undesirable impact of keeping it on your report longer than necessary.

Talk to the Debt Collector

Try to negotiate with the collection agency.

A collection account on your credit report appears as a negative element, so you must pay it off to improve your score. Before you do, contact the collection agency and inform them that you wish to pay the amount you owe. Stipulate that you will do so provided they withdraw the account from the credit bureaus. Request that they send you this agreement in writing prior to your payment. Not all agencies will agree to this concession, so be prepared to negotiate and speak to someone in management.

Be Prepared to Pay

Get ready to hand over the money.

Make sure you have the full amount available when you contact the collection agency. Knowing that you are willing and able to pay the past due account in full gives you leverage and increases the likelihood that they will be willing to work with you. Avoid paying a lesser settlement amount, if you are offered this option. While it might sound like a good deal, this will appear on your credit report as "Settled for less than full amount," which is still a negative factor.

Continue to Improve Your Credit

Work on other aspects of your credit to improve your overall rating, whether you are able to negotiate a deletion of your collection account. Experian, one of the three major credit reporting bureaus, suggests paying current bills on time, lowering open credit account balances and paying off debts as primary ways to increase your credit score. Check your credit reports regularly as well. Contact the credit bureau in writing if you find any errors so that they can investigate and remove them.

Time Is on Your Side

Before you know it, your credit will look great.

Know that this blemish won't be there forever, even if the agency refuses to remove the account from your credit report. According to the Federal Trade Commission, most negative accounts can only appear on your credit report for seven years. Maintain your efforts to avoid any further dings and your rating will continue to improve as the years go by.