Will having a debt collector after me lower my credit score? (2024)

FAQs

Will having a debt collector after me lower my credit score? ›

The bottom line

A collection on a debt of less than $100 shouldn't affect your score at all, but anything over $100 could cause a big drop. In many cases, it doesn't even matter how much it is if it's over $100. Whether you owe $500 or $150,000, you may see a credit score drop of 100 points or more, depending on where you started.

Paying off collections could increase scores from the latest credit scoring models, but if your lender uses an older version, your score might not change. Regardless of whether it will raise your score quickly, paying off collection accounts is usually a good idea.

Debt settlement can eliminate outstanding obligations, but it can negatively impact your credit score. Stronger credit scores may be more significantly impacted by a debt settlement. The best type of debt to settle is a single large obligation that is one to three years past due.

Will debt settlement hurt my credit? Ideally, credit bureaus want to see the words “paid in full” next to your outstanding debts. But this won't be an option if you settle. Settling your debt will hurt your credit and result in a lower score than if you'd paid your debt in its entirety.

You cannot remove collections from your credit report without paying if the information is accurate, but a collection account will fall off your credit report after 7 years whether you pay the balance or not.

One of the ways to delete a collection account is to call the collection agency and try to negotiate with them. Ask them to delete the collection in exchange for paying off your debt. Also, get the agreement in writing. If they accept it, your credit could increase by as much as 100 points.

Successfully disputing inaccurate information is the only surefire way to get collections removed from your credit report. If you've repaid a debt and the collection account remains on your credit report, you can request a goodwill deletion from your creditor, though there's no guarantee they'll grant your request.

It is theoretically possible to get a 700 credit score with a collection account on your credit report. However, it is not common with traditional scoring models. A derogatory mark like a collection account on your credit report can make it incredibly difficult to obtain a good credit score like 700 or over.

Collection accounts may affect your credit scores and may stay on your credit reports for up to seven years. Paying off collection accounts can have a lot of benefits, including potentially improving some of your credit scores.

Is it better to settle a debt or not pay at all? ›

Despite the potential downside, settling a debt by making partial repayment is better for your credit (and peace of mind) than neglecting it and leaving it unpaid. If you ignore a debt, the creditor will typically turn it over to a collection department or third-party collection agency.

But debt settlement usually stems from being severely delinquent or already in default, which can lower your credit score 100 points or more.

Collections reported with an original amount under $100 are disregarded by FICO® Score 8, FICO® Score 9 and the FICO® Score 10 suite. Unpaid medical collections >$500 are considered, but have less impact on the score within FICO Score 9 and the FICO Score 10 Suite compared to older FICO Score versions.

Typical debt settlement offers range from 10% to 50% of the amount you owe. Creditors are under no obligation to accept an offer and reduce your debt, even if you are working with a reputable debt settlement company.

Never give out or confirm personal or sensitive financial information – such as your bank account, credit card, or full Social Security number – unless you know the company or person you are talking with is a real debt collector.

If you receive a notice from a debt collector, it's important to respond as soon as possible—even if you do not owe the debt—because otherwise the collector may continue trying to collect the debt, report negative information to credit reporting companies, and even sue you.

Paying off a collection account does not immediately impact your credit score. It takes approximately seven years for the account to be completely removed from your credit history.

It is theoretically possible to get a 700 credit score with a collection account on your credit report. However, it is not common with traditional scoring models. A derogatory mark like a collection account on your credit report can make it incredibly difficult to obtain a good credit score like 700 or over.

Reasons why your credit score could have dropped include a missing or late payment, a recent application for new credit, running up a large credit card balance or closing a credit card.

For most people, increasing a credit score by 100 points in a month isn't going to happen. But if you pay your bills on time, eliminate your consumer debt, don't run large balances on your cards and maintain a mix of both consumer and secured borrowing, an increase in your credit could happen within months.