Check Personal Credit Reports For A Collection Account

Category: Finance, Personal Finance.

There is one thing most bankrupt people have in common- collection accounts. Sometimes it just takes a little time.

However, it s been my experience that most bankrupt people want to do the right thing and pay off the account( s) . And when you do the right thing, you expect the collection agency to do the right thing, too- don t you? Paying off a Collection Account Doesn t Improve Credit Score. Well, that, unfortunately s not always the case. Even after you pay off a collection account in full, and your credit reports show that you ve paid the collection in full and have a$ 0 balance, it won t help your FICO credit scores. Any appearance of a collection account on your personal credit reports lowers your credit scores. Here s why.

Once the collection account finds its way onto your credit report, it s part of your credit history. Original Dollar Amount of Collection Account Doesn t Matter. Whether you pay it off or not is of little consequence. Whether, the collection account is$ 100 for a severely overdue library book or$ 5, 000 for 50 overdue library books- the end result is the same- your credit scores can decrease by the same amount. Many people think that because the debt is small, it can t possibly hurt their credit scores. This is a critical point.

Wrong. However, if you let even a small$ 70 amount go to a collection agency, and it appears on your credit reports, it can damage your credit just as much. Everyone knows that late payments on your mortgage or car loan, which can be hundreds or thousands of dollars, will damage your credit. Bottom line: anything from a collection agency that appears on your credit reports is going to decrease your credit scores. Check Personal Credit Reports for a Collection Account. So, become extremely vigilant in protecting your credit reports from this type of information appearing in the first place. It s a good idea to check your personal credit reports on a regular basis.

Now would be a good time. When was the last time you checked yours? Go to www. myfico. com/ 12 and pay close attention to any negative items in the Public Records section. To Fight or Not to Fight. Another option would be to subscribe to a credit monitoring service that allows you to monitor all activity on your three credit reports. If you want to win the credit scoring war, you have to know which battles to fight.

You re going to lose those. even if you re right. The little battles over small dollar amounts are the ones you want to avoid. In my opinion, it s not worth the risk of lowering your FICO credit scores. It comes from a Life After Bankruptcy subscriber in Marietta, Georgia. Here s an example of how a collection account can damage your credit. She lived in an apartment with two other girls.

When they moved out, the apartment complex assessed them$ 300 in fees to cover damages to the apartment. They had all signed the lease. Two of them sent in$ 100 each, but the third didn t bother. You guessed it- it eventually showed up as a collection on all three of their credit reports. When the apartment complex sent a letter to all three girls demanding the last$ 100, the girls ignored it. That collection, for only$ 100, lowered her Equifax score from a high of 720 to a low of 512!

Wouldn t it have been worth it for them to swallow their pride and pay the last$ 100? This was years ago- and her score still hasn t fully recovered. Other Items that Show Up in the Public Records Section. When any of these items show up on your credit reports, your FICO credit scores go down. Other items that can show up in the Public Records section and are treated much like collection accounts by FICO scoring models are: - Federal and state tax liens( released and not released) - Judgments and satisfied judgments. - Bankruptcy. How much?

Sure, if you pay off the collection it will show a$ 0 balance on your credit report. There s no specific number, but your scores can easily go down by 100 points. or more. The problem is- from a credit scoring standpoint your FICO credit scores will go south regardless if the public record item is paid or not. You re better off paying what you owe before it gets sent to a collection agency and shows up on your credit reports. So the moral of the story is- once a collection account appears on your personal credit reports, you can t resolve it by paying it off.

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