How bad does a collection account effect my credit rating?

Question

Over the past two years I have been trying to raise my credit score, which I was succeeding with until a $1,900.00 bill that I did not know existed showed up in April. I disputed this account with the collection agency, but then because of the adverse effect it was having on my credit decided to go ahead and start paying it. I am now within two hundred dollars of having it paid in full. How will it effect my credit rating after it is paid in full? Should I have just left things "as is" and not paid the bill? Please help me!!

Answer 1

It's a good think that you took responsibility for the debt and paid it. (Good for you!).
After you finish paying, make sure you obtain a receipt or a letter from the collection agency showing that the debt has been satisfied. Follow up with them and see if they will report it as such on your credit report. If they will not, you might have to send a copy of that letter/receipt to the bureau(s) yourself in order to get the information updated.
Your score will not really go up since the debt has been paid. The only two factors that raise your score are 1) paying down your debt and 2) paying your bills on time. Settling delinquent accounts does not boost your score. It will rise over time and lenders will be very glad to see that your old account has been handled.
I hope that helps.

Answer 2

First off... the bank cannot legally send you to collections unless you've been overdrawn for thirty days with no positive activity in the accounts. Also, depending on who the bank does collections with, usually they don't even effect your credit report. All that'll happen is they'll send you to chex systems... which is a nation wide reporting agency that knows who you have accounts with, how many accounts you've had accounts with in the past, and if you owe any bank money. If you owe one bank money, usually no other bank in the country will let you open up an account. I'd tell the person at your bank that you'll call the BBB if they keep threatening you...that's just unethical.

Answer 3

Pay in full. It is the only way that it will be dropped from the report in 7 years or through written requests from the billing agency.