Category: Collections Law
Subject: Will paying a collections account off hurt my credit?
Question: I have a cell phone bill from 2001 that went to collections. I would like to know if it would be better to pay this debt off now or if I should wait a few months since it will then be 7 years. I do want to pay it off but I also want to help my credit. I read that if I make payment, then the account will stay on my credit report for 7 more years. I live in Washington.
Answer: Paying your account off will not (or should not)cause the account to stay on your credit for 7 more years regardless of what state you live in. If that were to happen it would be a violation of FCRA known as re-aging the debt.
Paying the debt may cause your score to drop and how much it will drop depends on several factors. The first factor is how large the debt is. If the debt is very large paying it off would have a slightly positive impact because you would improve your debt to available credit ratio. It would also have a much more negative effect because it would report as recent collection activity.
Many people mistakenly think that paying it off will take it off their reports and help their score and many more erroneously think that future creditors will look at it in a positive light because they paid it but the real truth is that most potential creditors will view it negatively because the listing shows that they had to be forced to pay it by a collection agency. Paying a debt collector will always hurt far more than it helps.
The only way that paying a debt collector will help you is in the event you are trying to buy a home or make other large purchase and the lender insists that you pay it off in order to qualify for the loan. If that is the case then people should use the method I teach called The Westcap Method
which results in the parties entering into a legally binding contract if the bank certified cashier's check is cashed. Please understand that this is not an Accord & Satisfaction (A&S) gimmick. Both parties must fully understand the agreement and that they are voluntarily entering into a contractual agreement. If the debt collector does not comply with the terms and conditions of the agreement they can be sued. People who use it should also understand that entering into such an agreement with the 3rd party debt collector will not affect how the original creditor reports or it's ability to do so.
Paying a debt collector also has another even worse effect because it rewards the debt collector, keeps him in business and believing that his abusive collection practices are the right way to do business because it pays him to treat people that way even if it is wrong. The best advice is never pay a debt collector a crying dime because it will hurt you every time.
People often want to pay debt collectors for moral reasons but morality should never be a factor in making a business decision. Debt collectors love to prey on people using morality as the reason they should be paid. That is a shabby trick to play on people. Any time money is involved it is strictly a business decision and should never be allowed to become a moral issue. If a debt collector attempts to use morality to shame you into paying you should ask him if he ever heard the saying that one should do unto others as he would have done unto him.Learn how to deal with abusive phone calls
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