Do you have a collection that needs to be paid? If yes, did you know you can either pay it in full or negotiate? If you have an account that’s gone into the collection stage, you’re probably aware that your credit is now dinged. Once you start to repair your credit, you’ll need to deal with that open collection. As you repair your credit, it’s important to know that the credit scoring model does not care whether you pay a collection in full or settle at a negotiated rate. There is no difference in how it will affect your score. So, with that knowledge, you’re probably thinking settling for less is the way to go. And you’re right.
How Will a Debt Settlement Affect My Credit Score?
When you choose to settle a collection, your goal is to get the best deal possible. If you’re not familiar with negotiating with collection agents, an experienced credit repair agency can do it for you and guarantee the best settlement possible. Collection agencies will push harder when negotiating against individuals vs. professionals. After your settlement is negotiated and paid, the creditor will update the status, and your credit report will read “settled” or “paid settled.”
What FICO Says about Collection Settlements
Your FICO credit score is used to calculate your credit score. It’s the most common scoring system used by banks, lenders, and credit providers. A collection settlement can remain on your credit report for up to seven years but has less of an impact as it ages and new positive activity is recorded.
How to Rebuild Your FICO Score after a Collection Settlement
Once you’ve removed the burden of an open collection(s), you can focus on rebuilding your credit score. Creditworthiness is based on your history of borrowing and repaying. A consistent track record of timely payments is the easiest way to start repairing your credit. There are several different credit cards on the market designed to help people repairing credit do just that.
Can a Credit Repair Company Help You?
If you’re ready to close out your open collection and start rebuilding your credit, a credit repair company is the fastest way to do it. They will coach you on how to negotiate the best settlement. In some cases, you may even be able to negotiate an early removal of the collection from your report. After your collections are settled, your credit repair company will help you make a fast-track plan to rebuilding your credit. As daunting as credit repair feels in the beginning, it’s usually a much smoother and faster process than most think when they have a good plan in place.