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This is a justified concern because creditors are unlikely to grant a loan if there’s a history of slow or no payments. A collection account is not as severe as a foreclosure or a bankruptcy, but your credit score will suffer.

The best way to handle delinquent debt is to pay it, right? Wrong!

How Bad Does a Collection Hurt Your Credit?

Paying a delinquent bill could be a double whammy on your credit report. Why? Making a payment on a bill in collection may cause your credit score to suffer again because bills turned over for collection hurt your credit score the most for two years. After that, the decrease in your credit score is not as great.

If you make a payment after two years, you renew the seven-year period in which an item stays on your credit report and your score will be damaged again.
So what do you do about those pesky collections on your credit report? Paying your bills is your responsibility, even if it causes your credit score to suffer.

However, you can and should negotiate with the creditor or collection agencies to minimize the damage.

Negotiate with creditors or collection agencies to pay less than the full amount of what you owe. This will not remove the collections from your credit report, but it will help your pocketbook!

How to Deal with a Collection on Your Credit Report

The best solution is to negotiate for a smaller payment and a letter of deletion.

FYI:  A letter of deletion is not a letter of payment. A letter of deletion is what a creditor or collection agency sends to the credit bureaus. It allows the bureaus to remove collections from your credit report. This is obviously the best-case scenario. Your credit score will surge if you can get a letter of deletion that wipes the collection from your credit report!

Qualifying for a letter of deletion is not easy. If the collection item was sent in error to the credit bureaus, it’s much easier to receive a letter of deletion.

The Fair Debt Collection Practices Act limits the ways creditors and collection agencies can contact you. If you believe they have violated the Act, you might be able to get a letter of deletion, so long as you promise to pay the collections on your credit report.

The most common violation of the FDCPA occurs when a collector fails to advise debtors about their right to dispute part or all of the debt within 30 days of first contacting the debtor.

Click here if you would like an introduction to a FDCPA attorney who can help you.

How Will Collections Affect A Credit Report?

How bad does a collection hurt your credit? Here are three things to know …

1. A collection can lower your score by 80–110 points if you started in the 700s, or 40–50 points if your score was already low. The impact is strongest in the first two years.
2. Scoring models treat collections differently. Older FICO versions (used in most mortgages) still penalize both paid and unpaid collections. Newer models like FICO 9/10 and VantageScore 3.0/4.0 ignore paid collections and weigh medical debt less.
3. The best outcome is deletion. Paying a collection doesn’t always raise your score, but it stops calls and lawsuits. If you can negotiate a pay-for-delete, the account can be erased from your report completely, giving you the fastest recovery.

A collection is one of the most damaging marks that can appear on your credit report. How bad does a collection hurt your credit? It depends on your starting score and which scoring model a lender uses.

I’ve spent more than two decades teaching people how credit scoring really works through my free credit education course, 7 Steps to a 720 Credit Score, and I’ve reviewed thousands of credit reports. In every case, one thing is clear: No matter where you start, a collection signals that you’ve fallen behind on payments, and lenders now see you as higher risk.

A collection account isn’t as severe as a foreclosure or a bankruptcy, but it will hurt your score, sometimes by more than 100 points. Understanding the impact is the first step toward limiting the damage and rebuilding stronger.

How Bad Does a Collection Hurt Your Credit?

The damage depends on where your score was before the collection. If your score was in the 700s and you otherwise have a strong history, a collection can drop your score by 80 to 110 points because it signals a sharp financial setback. If your score was poor prior to the collection, the drop might be closer to 50 points or less, since your score already reflects negative patterns.

Remember: Payment history makes up 35% of your FICO score. A collection shows that you let a debt go unpaid for months until it was charged off. That makes lenders nervous, which is why a collection is one of the most damaging things to have on your credit report.

How Can I Rebuild My Credit Score Fast?

How bad does a collection hurt your credit score? It can be a fast drop, but rebuilding your score can happen in just 12 to 24 months!

That said, not all scoring models treat collections the same way. Older FICO versions (still common in mortgage lending) count every collection as negative, regardless of the balance or type of debt. FICO 9, FICO 10, and VantageScore 4.0 are more forgiving. They ignore paid collections altogether and give less weight to medical debt. 

Unfortunately, you can’t always tell upfront which scoring model is being used because lenders don’t have to disclose what version of FICO or Vantage Score they are using. What you can do, though, is make an educated guess based on the type of loan. 

Here’s how different models treat collections:

Why Paying a Collection Can Sometimes Hurt Your Credit

To understand why paying a collection can sometimes hurt your score, it’s important to understand that credit scoring models pay more attention to newer information than older information. This makes sense: Your current behavior is a better reflection of your future behavior since your current financial situation is more important in how you will manage future debt.  

If you have an unpaid collection that has been idling in the background for a few years, paying it might bring the account into the foreground. In older scoring models, the account won’t reflect good standing, so it could look like you have a current account in collection. Yikes. 

The debt isn’t re-aged in terms of how long it stays on your report (collections still fall off after seven years from the date of first delinquency), but the scoring system may treat the update as recent activity and weigh it more heavily in the short term.

Still, paying is often the smarter move because:

1. It stops collection calls and the risk of lawsuits.
2. It shows future lenders you’ve taken responsibility.
3. In newer models, the benefit is immediate.

That said, be smart about how to deal with a collection on your credit report …

How to Deal with a Collection on Your Credit Report

The best outcome is a pay-for-delete agreement. This means the collector agrees to remove the account from your credit report once you pay. Not every agency will agree, but if they do, you get the best possible result: the debt is gone and the mark disappears.

How can you get a pay-for-delete agreement? We suggest saying something like this …

If you can’t get a letter of deletion, here are other strategies to consider:

• Negotiate a lower settlement. This won’t erase the mark, but it may save you money.
• Dispute errors. If a collection was reported by mistake, you have the right to challenge it with the credit bureaus.
• Check medical debt rules. As of 2023, medical debts under $500 no longer appear on credit reports.
• And be sure to join our free credit-education course, 7 Steps to a 720 Credit Score, where you will learn how to naturally improve your credit score in 12 to 24 months.

Have other questions about how to handle collection accounts? Check out these Frequently Asked Questions …

Frequently Asked Questions

1. How many points does a collection drop your credit score?
2. Does paying a collection help your credit score?
3. Do all collections hurt your credit the same way?
4. Why does a small collection hurt as much as a big one?
5. How long does a collection stay on your credit report?
6. Can you get a mortgage if you have collections on your credit report?
7. Can paying or settling a collection restart the clock?
8. Can I get approved for a loan or credit card if I have a collection on my report?
9. What happens if I ignore a collection?
10. What’s the difference between disputing a collection and negotiating a pay-for-delete?
11. Can collections be removed without paying?
12. How do I dispute a collection?
13. Should I dispute a collection account that is valid?

FAQ: How many points does a collection drop your credit score?

The exact point drop varies, but Experian has reported declines of up to 110 points for a single collection. The hit is usually sharpest for people with excellent credit because they have more to lose.

Here’s a rough idea of how much a collection might hurt your credit score:

Compare that to a late payment. A 30-day late payment might cause a 20 to 60 point drop, while a 90-day late payment can cause 70–100 points. A collection carries the same weight as a 90- to 120-day late payment, sometimes worse, because it signals the account was never brought current.

The good news is that while the initial drop is steep, many people see their scores begin recovering within 6 to 12 months once they start adding new, positive credit behavior.

Key takeaway: A collection can drop your credit score anywhere from 20 to 110 points, depending on where you started, but the damage isn’t permanent. Many people see their scores begin to rebound within a year once they start rebuilding the right way. To adopt the patterns of behavior that will help you rebuild your credit score, enroll in our course, 7 Steps to a 720 Credit Score, a free credit education course that shows you exactly how to add positive credit behavior, fix reporting errors, and climb back to the 700s faster.

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FAQ: Does Paying a Collection Help Your Credit Score?

It depends on the scoring model: Newer versions ignore paid collection accounts, while older versions still count any collection account (paid or not) as negative. 

• FICO 9, FICO 10, and VantageScore 3.0 and 4.0: Paid collections are ignored completely. Once updated to “paid,” the collection no longer hurts your score.
• Older FICO versions (including those used for most mortgages): Paid collections still count against you. To the algorithm, the fact that the debt reached collections in the first place is what signals risk, not whether you later paid it off. So, paying them won’t boost your score, and in some cases, updating the status may cause a short-term dip. (Keep reading to learn why this happens.)

That means someone preparing for a mortgage may not see a score increase after paying a collection, but someone applying for an auto loan or personal loan might.

Scoring Models Compared

The key takeaway here is this: If you’re applying for a mortgage, assume your paid collection still counts. For most other types of loans, newer models are more forgiving. One way or another, join our free credit-education program, 7 Steps to a 720 Credit Score, where you will learn how to naturally improve your credit score in 12 to 24 months. 

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FAQ: Do all collections hurt your credit the same way?

No, not all collections hurt your credit score equally. The type of debt makes a difference. Medical collections are treated more leniently, with unpaid balances under $500 excluded entirely as of 2023. Credit card and loan collections remain highly damaging and are reported in full. And unfortunately, utility and smaller bills can hurt just as much as larger debts because credit models focus on the presence of a collection rather than the amount.

Here’s a quick comparison:

Key takeaway: While all collections are harmful, medical debt is the one area where recent reforms have given consumers some relief.

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FAQ: Why does a small collection hurt as much as a big one?

Credit scoring models measure the likelihood of a person being delinquent in the next 24 months, not the balance size. In that way, a $50 parking ticket in collections can hurt your credit score as much as a $5,000 credit card bill in collections. 

To the models, both accounts mean the same thing: you defaulted. Even if you’re paying your other bills on time, one collection signals a higher risk of future default. That’s why even small bills, such as a forgotten utility payment or a gym membership, can do outsized damage.

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FAQ: How long does a collection stay on your credit report?

Collections stay on your credit report for seven years from the date of the original delinquency. This is the date you first missed a payment and never brought the account current. Paying the collection does not restart the clock, but in some states, making a payment can restart the statute of limitations for legal action.

The good news is that lenders and credit scores care more about recent behavior. Even if a collection is still visible, its effect fades the older it gets, especially if you’re paying on time and keeping balances low on new accounts.

Here’s what you should know …

If you are serious about rebuilding your credit score, be sure to enroll in our free credit-education program, 7 Steps to a 720 Credit Score, to learn how to offset the impact of collections.

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FAQ: Can you get a mortgage if you have collections on your credit report?

Yes, you can get a mortgage if you have collections on your credit report, but it may limit your options. Different loan programs treat collections differently:

In practice, underwriters often prefer collections to be paid, even if the scoring model ignores them. That’s because unpaid debts raise questions about financial responsibility.

If you’re preparing to buy a home, it’s worth paying or settling collections before applying, especially recent ones. It won’t always raise your score directly, but it makes you more mortgage-ready.

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FAQ: Can paying or settling a collection restart the clock?

Yes, paying or settling a collection can restart the clock, but it’s important to understand which “clock” we’re talking about. There are two timelines at play:

1. The credit reporting clock: Per the Fair Credit Reporting Act, collections stay on your credit report for 7 years from the date of first delinquency (the date you first missed a payment and never brought the account current). Paying, settling, or even making partial payments does not restart this seven-year reporting period. This rule comes from the Fair Credit Reporting Act (FCRA).That said, when you pay a collection, the account updates with a new status date. In older scoring models (like FICO 8 and the versions used in most mortgage lending), this “fresh activity” can cause the collection to be weighed more heavily in the short term, even though the seven-year clock itself does not change.
2. Then there is the statute-of-limitations clock: This is the period of time a creditor or collector can sue you to collect the debt. It varies by state, often three to six years, but sometimes longer. Making a payment, even a small one, can restart this clock. That means a debt that was about to expire could suddenly become legally collectible again.

Key takeaway: Paying a collection won’t restart how long it stays on your credit report, but it can restart the legal window for a lawsuit. Before paying or settling, know your state’s statute of limitations and consider negotiating a pay-for-delete to get the best outcome. And if you are serious about rebuilding your credit score, be sure to enroll in 7 Steps to a 720 Credit Score, a free credit-education course. 

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FAQ: Can I get approved for a loan or credit card if I have a collection on my report?

Yes, but your options will be limited. Lenders look at both your credit score and the details of your report.

• Credit cards: You may still qualify, but likely for subprime or secured cards with higher interest rates and fees. See our list of credit cards that are currently approving people with fair to poor credit. 
• Auto loans: Many auto lenders use FICO 8, which counts both paid and unpaid collections. You might get approved, but with higher rates.
• Mortgages: This is where collections hurt the most. FHA, VA, and USDA may require repayment plans for larger collections. Conventional loans will count collections in your risk profile. Some lenders will flat-out deny until collections are resolved.
• Personal loans: Approval varies widely. Fintech lenders and credit unions may approve if you’ve paid collections or show strong recent history.

Key takeaway: A collection doesn’t mean automatic denial, but it can limit your choices and cost you more in interest. Rebuild your credit score using the strategies taught in 7 Steps to a 720 Credit Score to qualify for better rates faster.

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FAQ: What happens if I ignore a collection?

Ignoring a collection doesn’t make it vanish, but the outcome depends on the type of debt, the size of the balance, and the collector.

Here’s the reality:

• Credit damage: The collection will stay on your credit report for up to seven years from the date of first delinquency, whether you pay it or not. The biggest score drop happens in the first two years, and after that the impact lessens over time.
• Medical collections: As of 2023, medical debts under $500 don’t appear on credit reports at all. Larger medical debts may still show up, but they’re less likely to lead to lawsuits than credit cards or personal loans.
• Collection calls: You’ll still get phone calls and letters, though you have rights under the Fair Debt Collection Practices Act that limit how far collectors can go.
• Lawsuits: For smaller debts, lawsuits are less common because the cost of suing is higher than what they might recover. For larger balances, collectors may sue, and if they win, they can garnish wages or freeze accounts depending on state law.
• Interest and fees: In some cases, balances can grow, but not always. Some debts are capped once they’re sold.
  

Key takeaway: If you truly can’t pay, ignoring a collection may feel like your only option, but it won’t make the debt disappear. The collection will age and eventually fall off your report, but you may deal with years of lower credit scores and potential harassment.

For people who have multiple collections or can’t keep up with bills, bankruptcy can be a smarter path. Bankruptcy stops lawsuits and wage garnishments, wipes out most unsecured debts, and allows you to rebuild your credit in 12 to 24 months instead of waiting seven years. If you are curious about bankruptcy, schedule a free consultation with our debt professionals to have your questions answered.

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FAQ: What’s the difference between disputing a collection and negotiating a pay-for-delete?

The difference is that disputing challenges the accuracy of a collection, while pay-for-delete is a negotiation to remove a valid debt after payment.

• Disputing means you’re telling the credit bureaus that the account is inaccurate, incomplete, or not yours. If the collector can’t prove it’s valid, the bureaus must remove it. Disputes are strongest in cases of reporting errors, outdated information, or identity theft. (If you need help disputing an error caused by identity theft or bankruptcy, be sure to enroll in 7 Steps to a 720 Credit Score for a free review of your credit report and legal support related to errors.)
• Pay-for-delete (also called a letter of deletion) is when you negotiate directly with the collection agency. In exchange for payment (sometimes the full balance, sometimes less), they agree to request removal of the account from all three credit bureaus. It works even if the debt is valid, but not every agency will accept it. When it works, you will likely see your credit score improve quickly.

Key takeaway: Disputing a collection is your right under the Fair Credit Reporting Act. Pay-for-delete is a negotiation tactic. Both can remove a collection, but disputes only work for errors, while pay-for-delete can sometimes remove valid debts.

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FAQ: Can collections be removed without paying?

Yes, but only if the collection is inaccurate, incomplete, or can’t be verified. Under the Fair Credit Reporting Act (FCRA), you have the right to an accurate report. If a collector can’t prove you owe the debt, the bureaus must remove it.

An error might be removed if: 

• The debt isn’t yours (identity theft or clerical error).
• The amount reported is wrong.
• The collector can’t produce documentation proving the debt is valid.
• The debt is older than seven years and should have already fallen off.

If you need help disputing an error caused by identity theft or bankruptcy, be sure to enroll in 7 Steps to a 720 Credit Score for a free review of your credit report and legal support related to errors.

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FAQ: How do I dispute a collection?

To dispute a collection, submit a formal challenge to the credit bureaus (Experian, Equifax, and TransUnion) stating that the account is inaccurate, incomplete, or not yours. Under the Fair Credit Reporting Act (FCRA), the bureaus must investigate within 30 days and remove the account if it cannot be verified.

Here’s how to do it step by step:

1. Go to AnnualCreditReport.com, the government-approved site for receiving free copies of your credit report from all three bureaus. Pull your Experian, Equifax, and TransUnion credit reports.
2. Look for any account that you don’t recognize, debts already paid, duplicates, or anything reporting incorrectly.
3. Collect documents like payment records, correspondence with the creditor, or identity theft reports.
4. Submit a dispute. You can do this online through each bureau’s website, by mail, or by phone. Send the disputes via certified mail, or file them online. 

• • Experian Dispute Center
  • Equifax Dispute Portal
  • TransUnion Dispute Page

1. The bureau will contact the collector to verify the debt. If the collector doesn’t respond or can’t prove it’s valid, the account must be deleted.
2. You’ll receive an update. If the collection is removed, your score may rise quickly. If it remains, and you believe it’s still inaccurate, you can escalate by filing a complaint with the Consumer Financial Protection Bureau (CFPB) or consider legal help.
3. You can also consider enrolling for free in 7 Steps to a 720 Credit Score. If you’ve been through bankruptcy or are a victim of identity theft, you will receive a free review of your credit report and legal support to help with disputes.

Key takeaway: To dispute a collection, pull your credit reports from AnnualCreditReport.com, identify errors, gather supporting documents, and file disputes with Experian, Equifax, and TransUnion online or by certified mail. The bureaus must investigate within 30 days and remove the account if it cannot be verified.

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FAQ: Should I dispute a collection account that is valid?

No. If the collection is valid, disputing it usually won’t work, and it could even backfire. The Fair Credit Reporting Act (FCRA) gives you the right to dispute items that are inaccurate, incomplete, or that can’t be verified. But if the debt is yours and it’s being reported correctly, the credit bureaus will almost always verify it and leave it on your report.

And here’s the kicker: Filing too many disputes, especially on valid accounts, can make the bureaus flag your file as “frivolous.” That makes it harder to get real errors corrected in the future.

If the collection is valid, your best options are:

• Negotiate a settlement (possibly for less than the full balance).
• Ask for a pay-for-delete agreement, where the collector removes the account from your report once you pay.
• Enroll in 7 Steps to a 720 Credit Score, where you will learn how to authentically build new-and-improved credit around your past negative credit items. 
• Consider bankruptcy if you have multiple collections and unmanageable debt. Bankruptcy wipes out most unsecured debt and can set you up to rebuild your credit faster than years of struggling with collections.
  

Key takeaway: Disputes are a powerful tool for fixing mistakes, not erasing accurate negative items. If the collection is valid, focus on resolving it strategically instead of disputing it.

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