Paying Collection Agencies – Think Twice

Did you know that paying collection agencies can actually hurt your credit score instead of making it better?

Lets say you have a collection account that is 4 years old. Now that account has some age and is not currently impacting your score as bad as it did when it was new. In fact, each year that progresses removes the sting from that collection even more until the 7th year rolls around and it is removed completely.

Now, if you pay that same 4 year old collection your score will take a hit and will drop. Why? When the payment was made the account was re-aged and the date of last activity was reset to the date when the payment was processed and the applied to the account. Now, that 4 year old debt has turned in to a month old debt and the 7 year clock has stared over. So instead of waiting 3 years for the collection agencies listing to fall off, you will now have to wait another long 7 years.

This is the reason that you should not be paying collection agencies. In fact, we recommend that you deal directly with the creditor and leave the collection agencies out of the picture. What you need to do is make an offer to the original creditor offering payment for removal of the debt from collections and removal of the debt from all credit reports from all credit bureaus (from collection agency and creditor). Send the offer certified return receipt and make sure that all correspondence is done in writing for proof of the agreement. If they try to call, politely tell them you will only deal with them in writing, give them your address and politely end the call. If they agree in writing to your conditions, then immediately pay the agreed upon amount. If they do not pay, then leave the debt alone and save that money for a rainy day.

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