In my last post, we talked about the first option for dealing with a collections account on credit report. This week, let’s talk about the second option.
Collections Account on Credit Report: Option #2
You could always wait for the right time to pay the collections account on credit report. If you are planning on making a purchase in the near future, paying a collections account might not be wise as it could hurt your credit score. In this case, just wait until you have made the purchase, then pay the account. The pros of this option:
- First, you will eventually satisfy your agreement with the creditor. There is a certain amount of peace of mind in fulfilling an obligation. The phone calls will end, the worries will end.
- You might be able to negotiate for a letter of deletion when you do make the payment.
- This will allow you to delay the damage to your credit score until after you have made your purchase and secured decent interest rates. This is particularly true if you have not made a payment on the account in more than two years. If this is the case, your score probably isn’t suffering much from the past mistake, so paying it could cause an okay score to turn into a bad credit score.
The cons: You will prolong the suffering. if you wait to pay the debt, your credit score will likely drop in the future. And in the meantime, creditors and collection companies will continue to hound you about the payment. And let’s not forget that you can always be sued for failing to pay a debt.
Still, this might be the smartest strategy if you are unable to secure a letter of deletion now, and you plan on making a large purchase in the future. Keep in mind that some banks will insist you pay a collections account on credit report before giving you a home loan. As you know, paying your collection could damage your credit score, so this is risky business. The last thing you want to do is hurt your credit and have the lender pull your credit report again! To avoid this sort of repercussion, pay your collection at the close of escrow. This way, you will preserve your credit score until the last possible minute.