Your credit score is very important. Not only can it affect the chances of you being accepted for a credit card, mortgage, or other financial product, but some employers and landlords will also look at your credit score before making a choice about whether to hire you or rent their property out to you. Because of this, having a collection appear on our credit report can be devastating.
Collections show up every time an agency reports a debt to a credit bureau and they can negatively affect your score. The good news, though, is that it is possible to prevent collections from negatively affecting your score. We have explained more about this below.
First of all, it’s important to note that the amount the collection is for is pretty much irrelevant. The collection will affect your score in the exact same way whether it is for $100 or $1,000. That said, the more collections you have, the more they will affect your score.
The biggest change will occur when the first collection hits your account. Every time the agency reports an additional collection, this will have an impact, albeit marginal. If, however, the agencies do not continue to report collections, your score will improve slowly over time.
In addition to the above, it’s important to note that paying off a collection will, in the majority of cases, have either zero impact on your score or a negative impact. The reason why this is important is due to dates. For example, let’s say that you had a collection reported on your account in 2016.
Over time, your score will have improved slightly as the collection gets older. However, if you now in 2019 decide to pay off the collection, the collection will appear as ‘current’ on your report. This can actually have a negative impact on your score, and it’s something that most people aren’t aware of.
Because paying off a collection in the traditional way won’t aid you, the trick is to get the collection fully removed from your credit report. The best way to do this is to contact the agency and offer to settle the debt in return for deleting the collection from your report.
Not all agencies will agree to this as it can damage their reputation with the bureaus, but many will in order to recoup the money that they are owed, so it is definitely worth asking.
Finally, we come to the question in the title of this article: how much will my credit score increase if a collection is deleted? The truth is, there’s no concrete answer as it will depend on how much the collection is currently impacting your account.
If the collection has lowered your score by 100 points, getting it deleted should increase your score by 100 points. A financial advisor can advise you on the benefits you will see.