Question: I have a few accounts in collections. What is the best way to go about paying them that will have the most benefit to my credit score? – Jeff from TX
Ashley Davison of Credit Saint responds….
I would start by calling all of them first to discuss your options. Are they offering payment plans? Is there a bulk settlement? Will they delete the damage from your credit report once paid?
These are the most important questions. Paying the balance of a collection account typically will not improve your score, as the damage has already been done. While the collection account will update to show a zero dollar balance, the damage will remain for 7 years from the date of first delinquency.
- If the company is offering to delete the damage when payment is received, these are the most important to work with first, especially if your concern is your score. Not all creditors will offer this. It actually is somewhat rare but worth asking about.
- Payment plans are a great option too because it will not drain your bank account but will usually ensure they will not escalate the situation by selling to another collection agency or seeking legal action against you.
- Settlement options are what I like best. My official position is to settle the debt and get out with spending as little money as possible. Start with the smallest and work your way to the largest. Make saving money a game. Save as much as you can this month and try to beat that number next month. When you save enough for the first settlement, pay it, and start again on the second. Just like the damage did not happen overnight, recovery doesn’t either!
Before, during, or after paying off the debt you may want to explore your credit repair options. They can dispute damage that you disagree with or feel is inaccurate, regardless of whether it is paid or not.
Stay organized and stay in touch. Keep a spreadsheet of the offers and options the companies have given you and follow up with them at a later date if they don’t have any options that fit your abilities now.
