A collection appearing on your credit report can be very devastating to your credit score and your financial stress. A collection agency will often report a collection account to one, two, or all three credit bureaus, depending on the agency. Paying off these collection accounts will not necessarily remove them from your credit report, but that also depends on the collection agency. However, there are a few things to be aware of when it comes to affecting your credit history that might help put you at ease.

What is a Collection?

The majority of the time, a collection account will remain on a credit report even after getting paid. Although this paid status will appear on your credit, the account itself will remain like a stain for the next seven years. After paying the collection off, the credit bureaus should be notified of the payment and mark any collection account as “paid” or “settled” on a credit report.

Regardless of payment, a collection account will still affect your credit history, credit score, and how lenders view your creditworthiness. Creditors and lenders look at all accounts for potential red flags or signs of financial untrustworthiness. These signs include any late payments, missed payments, charge-offs, bankruptcies, and collections.

It has been debated how much a paid versus unpaid collection account affects your credit score. Most believe that an unpaid collection account will penalize your credit score while a paid collection will not despite remaining in your credit history. Even though a paid collection may not affect your credit score directly, it will still harm potential opportunities from a creditor or lender looking through your credit history.

Even though this may seem unfair, there are a few exceptions to this rule. One is that medical debt collections work under slightly different rules compared to other forms of collections. Medical collections will be removed from a credit report if the balance falls below $500 or is completely paid off, unlike other collections.

Another way around this is to directly work with the collection agency to see if they will remove the account if you pay off the debt. Some collection agencies will be more sympathetic or lenient compared to others, so results will vary between collections but it is always worth asking.

What if the Collection Doesn’t Belong to Me?

If you believe a collection on your report is in error and does not belong to you, you have the right to dispute the account with both the collection agency and the credit bureau. Oftentimes, erroneous collection accounts appearing on your credit report may be the result of identity theft.

Identity thieves will steal the personal information of others to open fraudulent lines of credit with no intention of paying back the debt. The debt will often find its way back to the original “owner” of the account. Luckily, there is a way to dispute this without the need to pay back the fraudulent debt.

If you believe that you have been a victim of identity theft, you can send a dispute with the credit bureaus with a police report or fraud affidavit. According to the Fair Credit Reporting Act (FCRA), you can dispute any account that you believe is incorrect or fraudulent. Submitting your request with proper documentation like a police report will tremendously help with the investigation. Results may vary from person to person, but you should see the removal of the account within two or three months.

To confirm any information and inaccuracies in your credit history, you should obtain a copy of your credit report to confirm that a collection account has been marked as paid or even completely removed. However, credit reports can be confusing to navigate, so you may need help and guidance on how to get your credit back on track. Contact us at Fix Your Credit Consulting by calling (877) 212-2450. We are a team of professionals in the credit consulting industry, and we’re more than happy to help you by starting with a FREE consultation.

If you want to improve your credit score in other ways, call us at Fix Your Credit Consulting at (877) 212-2450 for a free consultation.

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