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From a discussion in comments, a question came up. For the purpose of this question, all I care about is my credit score.

  1. I got a credit card, used it and did not pay it back.

  2. The credit card company sent me to collections. The damage done to my credit score will take 7+ years to recover from.

  3. The collection company came knocking and asked for 10 cents on the dollar.

If the damage to my credit score is already done, why would I pay these collection companies if it would not help out my dying / dead credit score?

Can these companies affect my credit score post my debt being sold to them?

The question that sparked this question is here. Should I pay off a credit card or a collection balance first?

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  • Why do you think #2 would take 7+ years. For point #3 the collection company came to who? Your score(s) are calculated whenever new information is available. Every month that a delinquency is delinquent is new information.
    – quid
    Commented Mar 18, 2019 at 19:03
  • I was told that collections would be on your credit score for multiple years. The theoretical collection company came knocking at my front door. Does your last statement mean that once your debt has migrated from a normal company to a collections company; no matter how long you wait it will still be affecting your score.
    – Tolure
    Commented Mar 18, 2019 at 19:09
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    @quid The collection account would fall off credit report after 7 years, per the FCRA.
    – Hart CO
    Commented Mar 18, 2019 at 19:09
  • But that doesn't mean improvement takes 7 years. It just means A negative would remain for as long as 7 years.
    – quid
    Commented Mar 18, 2019 at 19:10
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    Credit Score is not the only thing in the world. If you don't pay, then can come back years from now and take your car or your house - you'd still owe them after 7 years.
    – Aganju
    Commented Mar 18, 2019 at 20:31

1 Answer 1

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Credit scoring models vary, the latest FICO 9 and VantageScore 3 ignore the $0 collection balance, so it could help your score to pay it off. Under older versions (still commonly used) it might not help your score to pay them off.

For example, under FICO 8 and older there is no benefit to paying off an account in collections (from a credit score perspective):

As far as your FICO score is concerned, two things are considered; has a collections appeared on your credit report, and when it was reported. So whether or not you pay your collections off is really a personal decision.

The collection account will also typically have less impact over time, but this varies by scoring model.

Can these companies affect my credit score post my debt being sold to them?

Consider the charge-off/collections to be the harm. They don't cause additional harm beyond that, but continued harm. They don't get to start reporting new late payments, but the collection account will continue to be reported.

Why would I pay these collection companies if it would not help out my dying / dead credit score?

You owe a debt, non-payment can result in legal action to compel you to pay. Depending on your ability to pay this might push you toward bankruptcy.

Additionally, many lenders don't just use credit score, they use all the information on a credit report (and more). A paid off collection account looks better to a potential lender than one left with a balance whether or not it affects the credit score.

Some sources:
Experian - Collections on Your Credit Report
Credit.com - How to Remove Collection Accounts From Your Credit Reports
Businesscreditreports.com - Facts about FICO 9

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