Does Paying Off a Collection Remove it From Your Credit Report?

Let’s get the bad news out of the way up front.  When you pay a collection, it is not removed from your credit reports. It stays on your credit reports for 7 years from the time the original account became 180 days past due.  This is what I refer to as the terminal delinquency.  Add 7 years to that date and that’s how long any collection remains on your credit reports.

It will be reported as paid (if you’re lucky), but just the existence still hurts your credit scores. And even if paid, your scores won’t change much, if at all. The collection incident does the most harm to your credit score in the first two years and as time goes by, impacts it less. This shouldn’t change your decision whether to pay the collection or not.  If you owe a debt and can pay it, you should.  Or, you should even attempt to settle it.Hopefully a creditor that conducts a manual review of your credit report will take into consideration that you’ve paid the collection. They would rather lend to someone who pays their obligations than someone who doesn’t.

Collection agencies may tell you they will remove it from your credit reports to get you to pay the bill. You need to get that confirmation in writing.  You can have the collection agency mail you a Pay For Delete Confirmation which states that the account will be removed from all three credit reporting agencies in exchange for a payment amount of $X.  But keep in mind that the credit bureaus have to agree to remove it.

Also, after you have paid a collection you can contact the collection agency and ask for a goodwill deletion.  The removal of it depends upon your reason and the collection agency.  It is worth a try.

Any account that you pay off such as a mortgage, auto loan is not deleted from your credit report because of the closure.  This information is considered part of your credit history and is important information for a credit grantor to determine how you have paid your bills in the past.  Positive data can stay on your credit file forever; negative information remains for 7 years and most bankruptcies remain for 10 years.

The important issue to remember is to make the best effort to pay your bills on time and not get into a situation where you are past due on your accounts.  This has a negative impact on your credit which lasts for several years but not forever.  Collections aren’t removed from your credit file when you pay them off but you can try to negotiate with them.

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.

Categorised in: Credit Report, Credit Score, Getting Credit, Money & Identity

This post was written by John Ulzheimer