When Should You Negotiate A Collection?

"Don’t pay that collection because it will hurt your credit score”

If you’re dealing with credit challenges, you’ve probably heard this advice at some point during your journey towards healthy credit. Unfortunately, this advice can be misleading, and result in further issues down the road with your credit score.

If you’re wondering when or if you should pay a collection, ask yourself these questions first.

  1. Is this account legit? At Premier Credit, we believe you should pay your debts. However, we also believe in advocating for consumers by upholding their rights. If you check your credit report and see a collection, you need to make sure it is legitimate before paying the account. One in four credit reports have material errors, and for consumers with derogatory credit, there’s a high likelihood that there are violations from creditors breaking the law attempting to collect from you.

  2. How old is the collection? This is where most people get the idea that if you pay a collection, it will hurt your credit score. The reason is because most collections have a Date of Last Activity that will be brought current with payment (meaning if it is five years old, once it is paid, the date will reflect the most recent activity date). This can negatively impact your credit score while extending how long the collection can stay on your credit report.

  3. Can I pay the account in full? Payment plans for collections are a trap. Not only does the collection update the Date of Last Activity with each payment, but often times you can negotiate a much better settlement if you can pay the account in full. There are times when a payment plan is necessary, but think twice before you pay $10 a month towards that $50 medical collection. It could have drastic credit score implications.

If the answers are:

  1. Yes, this account is mine and legitimate.

  2. The account is not older than 3 years.

  3. Yes, I can pay the account in full.

Then yes, you should take the next step towards resolving your collection account. DISCLAIMER: IF YOU ARE WORKING TOWARDS A HOME PURCHASE, SPEAK WITH YOUR MORTGAGE PROFESSIONAL FIRST.

Next week we’ll outline a strategy to help you negotiate your collection to save money and get the best possible reporting outcome on your credit profile.

If you have old collections, or are sick of dealing with credit challenges on your own, we’d be happy to help you fast-track your journey to healthy credit. Schedule a free evaluation here.