The Real Deal on Paying off Collections

Collection companies often mislead consumers into thinking that paying off collections will raise their credit scores. In reality, paying off collections can lower your credit score. Collections are usually reported as a “9” status or collection account, indicating the creditor has already written off the account and assigned it to collections. Once reported, the damage to your credit score is irreversible unless the item is removed completely.

Understanding Collection Accounts

When you pay off a collection, the collection company reports a $0 balance but does not delete the item from your report. The account remains a collection, signaling a high risk of future default.

Impact on Credit Score

The “Date of Last Activity” is updated to the date of payoff. For example, if an account was sent to collections three years ago, paying it off today updates this date, potentially lowering your credit score.

Working with Collection Companies

Some clients can negotiate with collection companies to remove the negative item completely if they pay it off, though this is not always successful. Alternatively, challenging the item based on FCRA laws can lead to its permanent deletion, saving money and improving credit scores significantly.

Realistic Expectations

Setting realistic expectations is crucial. Clients need to understand that improving credit scores takes time and patience. It’s essential to reassure clients about sustainable goals and the realistic impact on their credit profiles.

Strategies for Paying Off Collections

  1. Negotiate for Removal: Try to negotiate with the collection company for a complete removal of the item from your credit report upon payment.
  2. Challenge the Item: Use FCRA laws to dispute and potentially delete the item permanently.
  3. Avoid Updating Activity Date: Be cautious about paying off collections as it can update the date of last activity, possibly lowering your score. Can Help offers resources and support to help clients navigate paying off collections effectively. By understanding the impact of collections on your credit score and working strategically, you can improve your financial health.

For more information and assistance, visit

Credit Score Chart

Credit Score Range Rating Impact
800-850 Excellent Lowest interest rates
740-799 Very Good Favorable rates and terms
670-739 Good Acceptable rates and terms
580-669 Fair Higher interest rates
300-579 Poor Lowest chance of approval