Why pay collection?

[Ira]

What’s the point of paying off collection companies if it doesn’t come off your credit report?

[Tracy Winters]

Various reasons… Here’s why:

It is true that paying collection will NOT erase the item from your report, and will NOT improve your score. The only thing that will happen is that the status will be updated to PAID or SETTELD and the balance will be show to $0.

Still, there are many benefits to paying you debts:

To start with, collection agencies tend to sue right before the statue of limitation. In many cases (especially if the debt is yours) they will get a judgment against you.
The judgment will appear on your credit report as a new item, and will once again impact your score severely.

If you have imagined the collection fall of your report after 7.5 years – think again. That new judgment will stay another 7.5 years, which may even be extended if not satisfied.

Not to mention that the debt will grow exponentially, incurring interest, fines & legal fees.
So in the end you WILL pay, only in the way you’ve paid much more and ruined your credit.

Another thing to consider is that most creditors look at much more than just your score. They actually go over your credit report and look for things like unpaid collections, judgments, liens etc. You need to resolve all your derogatory items, so they show on your report as paid/settled with zero balance

In many cases, your actual credit report is more significant than your score. For example, you can have a Fico of 680 and not qualify for a mortgage or a car loan because your credit report contains unresolved derogatory items, while someone else with a 640 Fico but a clean credit report does qualify.

Hope this clears the subject

[Author]

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