Collections! How Accounts That Land Here Hurt Credit Scores
‘Collections’ is one of the dirtiest words in the credit business. If any of your accounts that land in here, your credit score will be negatively impacted. When an account goes into collections there are dozens of factors that determine how many points your credit can and will drop.
The higher your credit score the harder it will fall. For example, if you have great credit, a 90-day late account could cause your credit score to drop 50 points. However, if your credit score is already on the low end, the delinquent account could cost you only 10 points.
An account in collections will have the biggest impact on your credit within the first two years. As it ages, the impact becomes less severe. According to
FICO® and VantageScore ®, paying off your delinquent accounts is clearly a means to salvage your credit score. Don’t just leave it unpaid.
Furthermore, the delinquent account can stay on your credit report for up to seven years. The seven years is also the statue of limitation in most states. If you do not pay your delinquent account, the creditor has the right to sue you for the balance as long as they a within the statue of limitation.
If you end up with an account in collections, don’t give up. Respond, being prepared make a payment of some type. If you think anything they say you owe is incorrect, research and be prepared to fight. Credit Karma notes there are many different ways to respond to debt collectors and that what’s most appropriate for you will depend on your circumstances. If you believe the information about the account in collections is accurate, you could attempt to negotiate and settle with the collection company, according to Credit Karma. It recommends contacting the Consumer Financial Protection Bureau on how to reply to a debt collector and what the best ways are to negotiate a settlement.