How to Pay Off Collections to Raise Your Credit Score

Credit scores are used for everything from approving a car loan to hiring a new employee. If you have debt that has ended up in collections, it is certainly affecting your credit score. There are different strategies, though, to pay off these collections to raise your score. These include paying a lump sum, prioritizing recently reported debts and cleaning up all your credit reports.

Instructions

1

Check all your reports. Before you start to send checks to collections agencies, make sure you know everything that has been reported. There are three credit bureaus -- Experian, TransUnion and Equifax. Order a copy of your credit report from each one directly or via a third party service. You are legally entitled to a free report from one of the agencies via AnnualCreditReport.com (under Resources). Go through all the reports and make a list of all the items that have gone to collections. Dispute any that are in error.

2

Request item be deleted with payment. Negotiate with the collections agency to have the item removed from your credit report in exchange for full payment. You can negotiate by phone but make sure to get it in writing before you send payment. Collection agencies will record most phone calls so do not admit that you are liable for the debt on the record.

3

Pay off most recently reported collections. Bankrate.com reports that 35 percent of your credit score is calculated from how you pay your bills, placing the most emphasis on recent activity. Your credit report will show the date that the collection agency last reported a balance due. Pay these first. If you have an account sent to collections with a last reported date close to seven years ago, consider letting it go. A credit bureau cannot legally report a negative item after seven years.

4

Pay off the collections in full. If an account is in collections, making a partial payment is not going to take it out of collections. It will also update recent activity on the account, making it a greater negative factor on your report if the account had been idle for some time. Pay the whole amount due if you can. If you're able to secure a credit card, consider using it to pay off the collections account and then make partial payments on the account. The price of paying interest might be worth the increase in your credit score.

5

Dispute items after paying collections. Bills.com reports that credit bureaus only update their credit data every 90 days. After you pay a collections agency, the item on your report is technically in error. Dispute the item using each of the credit agencies online dispute form. The credit bureau will contact the collections company to request confirmation of the data within 30 days. This should help expedite the raising of your score.