Good Question: Tackling unpaid collection accounts

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Question: What impact do unpaid collection accounts have on my credit score?

Answer: The dam­age to your credit score oc­curs when the ac­count goes into col­lec­tions. How­ever, ig­nor­ing un­paid col­lec­tion ac­counts keeps the good credit ac­tions that you’re tak­ing from im­prov­ing your credit score.

So, how should you han­dle un­paid col­lec­tion ac­counts? Pay them off.

To find out what type of ac­counts are on your credit re­port and if there is any­thing you need to han­dle, you first need to check your credit re­port. Go to­nu­al­cred­itre­ and ob­tain a free copy of your credit re­port. Your credit re­port will list the cur­rent pay­ments you are mak­ing to cred­i­tors — like your mort­gage, car loan or util­ity bills — and it will also list ac­counts that have been charged off and sold to col­lec­tion agen­cies.

The credit re­port will de­tail the con­tact in­for­ma­tion for the col­lec­tion agency hold­ing the ac­count. Con­tact the col­lec­tion agency and make ar­range­ments to pay off the debt. Once the debt is paid in full, you should re­ceive a let­ter or a re­ceipt from the col­lec­tion agency. Al­ways re­tain the doc­u­men­ta­tion that you paid the ac­count. Oftentimes, the debt may re­sur­face on your credit re­port from a dif­fer­ent col­lec­tion agency.

Typ­i­cally, col­lec­tion ac­counts re­main on your credit re­port for seven years. How­ever, in some in­stances the agency will re­move the ac­count once the debt is paid if you re­quest they do so.

Clean­ing up un­paid col­lec­tion ac­counts on your credit re­port will then al­low pos­i­tive in­for­ma­tion to start to out­weigh the neg­a­tive.

The pos­i­tive in­for­ma­tion that can im­pact your credit score is pay­ing your bills and pay­ing them on time. Mak­ing timely pay­ments to your cred­i­tors ac­counts for 35 per­cent of your credit score. Not pay­ing your bills on time each month will neg­a­tively af­fect your credit score.

Another fac­tor that af­fects your score is the amount of debt you owe, so pay­ing down debt will help im­prove your credit score. It’s also a good idea to keep open any paid-off ac­counts, so you have credit avail­able to you.

Also, lim­it­ing the amount of new credit you ap­ply for will also re­flect pos­i­tively on your credit re­port. Each time you ap­ply for a credit card or loan, your credit score takes a slight hit. How­ever, check­ing your credit re­port through­nu­al­cred­itre­ has no ef­fect on your score.

Im­prov­ing your credit score can take time, and the only way to know what you’re deal­ing with is to check your credit re­port and start tack­ling items one at a time. It will pay off fi­nan­cially in the long run.


Heather Mur­ray is man­ager, reg­u­la­tory com­pli­ance and ed­u­ca­tion for Ad­van­tage Credit Coun­sel­ing Ser­vice (dba Con­sumer Credit Coun­sel­ing Ser­vice). For more in­for­ma­tion about the agency’s ser­vices, please visit­van­ or to ac­cess the free on­line bud­get­ing tool, go to www.on­line­bud­ge­tad­vi­ If you have money or credit man­age­ment ques­tions, you can email Ms. Mur­ray at hmur­ray@ad­van­ Please pro­vide your name, ad­dress and day­time tele­phone num­ber with all in­qui­ries. Ms. Mur­ray tries to re­ply to all in­qui­ries but, be­cause of the vol­ume of ques­tions she re­ceives, she can­not al­ways re­spond.

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