How Fast Can Your Credit Score Go Up After Paying a Collection?

Sometimes, paying off your debt obligations from years ago can hurt your credit score. How fast your credit score goes up depends on the reporting from the original lender; it is also possible that you won't improve your score at all. Most of time, paying off old debts helps you even if it does not impact your credit score.

Identification

Paying off a collections account will not improve your score, according to Fair Isaac Corporation -- creators of the credit scoring formula used by most lenders -- spokesman Craig Watts. You will improve your score if you pay a written-off debt when the original creditor reports a zero balance on your account. How much paying off the original creditor helps your score relies heavily on the rest of your credit report, but your score can see an increase of several dozen points.

Interesting Fact

The credit scoring agencies tweaked their formula during the first decade of the new millennium to prevent paying off a collection from hurting your score. In years past, paying a collections account renewed the delinquency date of the debt. The FICO score model gives less weight to collections accounts as time passes, so paying the debt is ethically right, but a poor decision for your credit score.

Other Benefits

Paying off a collections account is more important for showing good character than improving your credit, according to Bills.com. Lenders consider more than just your score when extending credit; they look at how committed you are to paying off debt. Some lenders may not approve a loan application until all collections are paid.

Tip

Each state puts a time limit on how long a creditor can attempt to collect a debt. Once the statute of limitations passes, you can refuse responsibility to the debt if sued, according to MSN Money Central. Paying off the debt or doing something to claim the debt, such as contacting the collections agency about it, could reset the statute of limitations on the debt. Also, settling an account with the creditor for less than you owe is worse for your credit than refusing to pay, because settling an account could make the date on the debt more recent.