Paying Off This Debt Won’t Help Your Credit Ratings
Under the Fair Credit Reporting Act, a collection account will remain on your credit reports for seven years and six months from the date you fell behind with the original creditor. Collectors may make it sound like paying off collections account will improve your credit, by telling you that they will update your credit report to “paid in full” status. But this probably won’t help your credit scores. Collection accounts are negative, regardless of whether they are paid or not.
In an an article titled “Will Paying a Collection Improve My Credit Score,” Credit.com’s credit scoring expert Tom Quinn wrote:
The fact that a collection account is on your credit report (regardless of balance) is, in and of itself, predictive of future risk, as research shows that consumers with collection accounts on their credit report are less likely to pay as agreed in the future than consumers with no credit report blemishes.
On the other hand, paying the collection account may stop the creditor or collector from suing you, and a judgment on your credit report could hurt your credit report even more. Additionally, some mortgage lenders may require you to pay or settle collection accounts before giving you a loan.
See the Fair Debt Collection Practices Act - MANY consumers have won lawsuits when collection agencies threaten them or do things they are not supposed to be doing