Updated: Jan 27, 2022
When you pay an account that's in collections in full, its impact on your credit won't go away immediately. The statute of limitations determines when it’s removed from your credit report, which is around seven years. However, the older the account, the less negative impact it has on your credit score.
Even though paying off your collections account may not improve your credit score, there are still several ways it can benefit you:
Avoid a debt collection lawsuit for unpaid medical and/or credit card bills.
Relieve potential interest fees from debt collectors. Debt collectors constantly buy and sell unpaid accounts and can continue to charge you interest and fees.
Paying off a collection will show on your credit report as “paid in full” or “settled.” This could positively influence lenders who might look beyond your score to your credit history. A person who pays back a past due account shows more financial responsibility than someone who never pays it.
Benefit from the new FICO® Score model. The new FICO 9 is slowing being integrated but it will eventually be used by most lenders. The new model gives less weight to unpaid medical bills and ignores paid accounts in collections entirely.
How will collections accounts affect your credit?
Having a collection account added to your credit report can affect your score as much as 110-points taking your score from fair to poor.
What to do if you have accounts in collections
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