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Does Paying Off Collections Improve Your Credit Score?

Written by Mike Pearson
Updated October 1, 2022

If you have an account in collections, you might be disappointed to learn that paying it off usually won’t help your credit score.

However, there are other benefits to paying off these types of accounts, so it’s worth considering settling your unpaid accounts. 

What Are Collection Accounts?

When you fall behind on payments to a creditor, the creditor may eventually sell your account to a third party rather than continuing to ask you to pay. For a creditor, selling your debt to a collection agency may be cheaper and easier than spending months or years trying to collect payment. 

Typically, creditors try for several months to get you to pay. For example, they will usually send past-due notices, letting you know your account is 30, 60, or 90 days overdue. 

If you fall far enough behind, your creditor will probably send you a letter or notice saying it’s preparing to send your debt to a collection agency. When that happens, the original creditor stops contacting you and the debt collector takes over. 

Just because your account goes to collections doesn’t mean you are no longer obligated to pay it. If a collection agency has purchased your debt, you must pay the collection agency to settle the debt.

One of the major downsides to having a debt placed in collections is that the collection agency will report it, but the original creditor is still permitted to report it, too. This means your unpaid debt could show up twice on your credit report, doing serious damage to your credit score

Will Paying a Collection Improve Credit and Credit Report?

Unfortunately, paying off a debt that has gone to collections is unlikely to help your credit score. This is because the debt collector will simply mark the debt as “paid” without deleting it from your report. 

Benefits to Paying Collections

While settling an account that has gone to collections is unlikely to help your credit score, there are still good reasons to pay what you owe. Here are several important 

reasons to consider paying off your collections. 

Avoid Lawsuits

Assuming the statute of limitations hasn’t tolled on your debt, the collection agency has a right to file a lawsuit against you in an attempt to collect the debt. Not only is it costly to defend a lawsuit, but losing the case could mean the debt collector is allowed to garnish your wages until the debt is paid. 

Avoid Interest Fees from Debt Collectors 

Some state laws allow debt collectors to charge interest on the debts they purchase. If you owe money to a collection agency, the debt could be racking up interest. 

Appear as Settled/Paid in Full

When you pay a debt in collections, the collection agency must mark it as “settled” or “paid.” This can be more appealing to a future creditor than an unpaid debt, as it shows you’ve taken responsibility for your debts. 

Furthermore, some lenders won’t work with you if you still owe money on past debts. Settling your debts now could increase your chances of qualifying for credit down the road. 

How Unpaid Collections Affect Credit

Unpaid collections can take a serious toll on your credit score. The longer a debt goes unpaid, the more damage it can do to your score, which is why it’s important to pay a debt as soon as you can. 

30-day Late

Even a single 30-day late item on your credit report can lower your credit score between 60 and 110 points. Keep in mind that your payment history accounts for 35 percent of your credit score, which is why it’s so important to always pay your bills on time.   

Debt Settlement 

Having a debt settlement on your credit report can drop your score anywhere between 45 and 125 points. 


A foreclosure on your credit report will typically lower your credit score somewhere between 45 and 160 points. 


Filing bankruptcy will do significant and long-term damage to your credit score, which is why you should only resort to it as a last option. Having a bankruptcy on your credit report can drop your score by 130 and 240 points.

Maxed-out Credit Cards

A maxed-out credit card can lower your credit score by anywhere between 10 and 45 points. The amount of damage a maxed-out card can do to your score will generally depend on the card limit.

How to Remove Collections Accounts from Credit Report

Paying off a collection account won’t remove it from your credit report, but there are other strategies you can use to get the account removed and hopefully boost your score. Here are some methods to try if you want to remove the collection account from your report. 

Dispute the Collection  

Creditors, including collection agencies, are required by law to report accurate information. If you find any errors or inaccuracies on your credit report, you have a right to dispute them, and the debt collector is obligated to remove them.

To dispute a collection account, you’ll need to do the following:

  • Order your credit report – You’re entitled to one free credit report from all three major credit bureaus every 12 months. You can get your free reports by visiting
  • Review your reports – Once you have your reports, read through them carefully and highlight any mistakes or errors you find, including mistakes in your name, address, or dates you owned the account. Be sure to review each report separately, as not all creditors report to all three credit bureaus.
  • Dispute the accounts – If you find a mistake, write the collection agency and ask them to validate the debt. By law, they must investigate and return with an answer within 30 days, and they must delete the account from your report if they can’t validate it.

Pay for Delete Letter

If the collection agency validates the debt, you can try sending a pay-for-delete letter. This is when you ask a creditor to delete a negative item from your credit report in exchange for you paying the debt.

Collection agencies want to get paid, so they might be willing to accept a lump sum settlement if you offer one. If you send a pay-for-delete letter, make sure you include all the important information, including:

  • Your name and address
  • The account number associated with the debt
  • All relevant dates, such as the debt you acquired the date
  • How much you owe
  • How much you’re proposing to pay

If the collection agency responds by saying it’s willing to negotiate, make sure you get their agreement in writing and signed by an authorized representative. Remember that creditors, including debt collectors, aren’t required to say yes to a pay-for-delete letter. 

Goodwill Deletion

In some cases, you can persuade a creditor to delete a negative item as a nice gesture. However, this usually only works if you have a long-term relationship with the creditor and usually maintain it in good standing. 

If you choose to send a letter requesting a goodwill deletion, be sure to include your reason for falling behind on your debt. An unexpected job loss, medical emergency, or natural disaster may move your creditor to delete the negative entry that’s hurting your credit. 

Debt Collection Rights and Law

Just because you owe money to a debt collector doesn’t mean you don’t have rights. On the contrary, federal and state laws extend numerous protections to debtors, and they also impose many important restrictions on creditors. 

Under the Fair Debt Collection Practices Act (FDCPA), creditors are prohibited from doing the following:

  • Calling you at work – If you tell a creditor not to contact you at work, they are prohibited from trying to make contact with you while you’re on the job. 
  • Calling during certain hours – The FDCPA prohibits creditors from calling you before 8 a.m. and after 9 p.m.
  • Intimidation and harassment – Creditors, including collection agencies, can’t harass or intimidate you in an effort to collect a debt. For example, they can’t threaten to arrest you or get you fired.

If you believe a collection agency or other creditor has violated your rights, help is available. You can contact the Attorney General in your state or file a report with the Consumer Financial Protection Bureau (CFPB).

Credit Improvement Tips After Collection

If you’ve paid off a collection account but were unsuccessful in getting it removed from your credit report, don’t give up. There are still plenty of things you can do to improve your credit.   

  • Dispute negative items on your credit report – Just because you can’t get a paid collection removed from your credit report doesn’t mean you won’t be successful in having other items removed. Review your credit reports thoroughly and dispute any mistakes or inaccurate items.
  • Pay your bills on time – Your payment history is the most important factor in determining your credit score. If you have any past-due accounts, pay them as soon as you can.
  • Pay off debts – You can improve your credit utilization by paying off debts, which gives you more available credit. One strategy is to start with the smallest debts first and then work your way up to larger debts.
  • Open a secured credit card – Bad credit can make it tough to qualify for a traditional credit card. However, you can probably qualify for a secured credit card, which can help you start building credit right away.
  • Piggyback on someone else’s credit – If you know a friend or relative with good credit, ask them to add you to their credit card as an authorized user. This allows you to get credit for on-time payments made toward the balance. 

Paying a Collection FAQ

The following are some of the most frequently asked questions and answers regarding paying a collection. 

Is It Better To Pay Off Collections or Wait?

It’s generally a good idea to pay off a collections account as soon as you’re able, but you should consider waiting if the account is due to drop off your report. For example, if you’re close to the seven-year mark for the account, it might be better to simply wait it out. 

How Long After Paying a Collection Will My Score Go Up?

Because paying a collection doesn’t remove it from your credit report, the collection itself can continue to hurt your score for up to seven years. However, you can improve your score in the meantime by paying your bills on time, opening a secured credit card, and taking other steps to rebuild your credit

How Long Do Collections Accounts Normally Stay on Your Report?

Negative items, including collection accounts, can remain on your credit report for up to seven years. A bankruptcy can stay on your credit report for up to 10 years.


Paying off a collection account probably won’t help your credit score, but settling your debt can help protect you from being sued, stop interest from accruing, and increase your chances of getting credit in the future. If you have a collections account on your credit report, you’re usually better off paying it than ignoring it. 

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Mike Pearson

Mike is a recognized credit expert and founder of Credit Takeoff. His credit advice has been featured in Investopedia,, Bankrate, Huffpost, The Simple Dollar, Reader's Digest, LendingTree, and Quickbooks. Read more.