For several reasons, paying collection agencies is something can have a very negative effect on your borrowing ability due to the negative effect on your credit score that it causes. Making regular payments to a collector will also usually greatly lengthen the statute of limitations, or amount of time the collector has to sue you in court.
If you are considering, or already have begun paying collection agencies, I would suggest considering the benefit that you will receive from paying a collection agency, versus the other benefit you could receive by extending an alternate offer to the collection agency. Many times, if you are willing to offer a payment to a collector they are willing to negotiate to remove the item from your credit report. This is a much better scenario than simply paying collection agencies every month and not receiving any credit score increase because of it.
That’s because even if you’re paying a collection account on time, it’s still a collection account. Paying collection agencies in this manner doesn’t benefit your credit score, but it does cause the negative information to remain on there for much longer because it will be reported for 7 years from the date you made your last payment.
We’ve created this brief PowerPoint presentation to demonstrate why paying collection agencies over time is generally not the best action to take, especially when there are other less expensive and far less time consuming options available.
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