Collection Account Tips: Brief Synopsis
- Collection accounts report to credit bureaus, and lower your score.
- Just paying off a collection account will not raise your score!
- Try to settle at the end of the month, when agencies have quotas.
Collection Account Tips: Full Explanation
One of the most common derogatory items on a consumer’s credit report is a collection account. When a bill is left outstanding with a company, they will often outsource this bill to a collection agency. This collection agency’s only job is to get consumers to pay up – and are extremely persistent! This is why many consumers are hounded by phone calls and letters from agencies, saying that they owe money. Many of these collection accounts will also appear on your credit report, which can significantly lower your score.
There is a huge myth that has been circulating in credit repair circles for years, and many consumers believe it as fact. They believe that paying off a collection account will boost your credit score. This is simply not true! It is the event of having a collection account that is damaging your credit report → not whether or not the collection account has a balance owed. To get a significant boost in your score the goal is to get the collection account deleted. Beware of scam consultants who will advise you to simply pay down all of your collection accounts. This may be good for other reasons, but it will NOT help your credit score. Your best bet in dealing with collection accounts is to get them professionally deleted.
Bonus tip: If you are settling a collection account, you may well get better results by negotiating at the end of the month. Many collection agencies work on a quota system. The office (assuming a larger collection agency) who handles your account has a quota every month to collect. If you negotiate with them at the end of the month, often they will be more anxious to settle if they have not yet hit their monthly collection quota!