Collection Accounts, How they Affect Credit

Other than a bankruptcy or foreclosure, one of the worst mistakes you can have on your credit report is a delinquent debt that went into collections. These accounts are various types of debt that you fell behind on. They escalate to the point where a debt collector took over. Collection accounts will cause your credit score to take a big hit. They stay on your credit report for up to seven years from the time you fell behind on payments. If you pay the collection account does it get removed from your credit report? No. It’s a common misconception that it does. However, it is still important to settle any outstanding accounts that have gone to collections.

Why Pay off a Collection Account?

collectionsYou may be asking yourself why pay off the collection if it remains. Settling the account is important for two reasons. It will prevent you from potentially being sued. This can result in the court ordering wage garnishment, putting a lien on your property, or even freezing your bank account until the debt is settled. The second reason is settling a debt can help your credit score over time. While a collection account will stay on your report for up to seven years, the account will be marked as paid. As your credit report gets older, and you maintain good habits, your credit score will gradually improve the closer you get to the seven-year mark.

Can I get the collection account removed? You can, however, in the end the collection account, even paid, will remain on your credit report. If you really want to use every option to remove the collection account, contact a credit repair company. The best way to have collections removed from your credit report is to make sure that you never have an account go into collections. Make smart borrowing decisions, pay all your bills on time, and practice good debt and financial management techniques.

Posted in bad credit, Debt.