A debt collection is one of the worst entries on your credit report. A collection is a severely past due account that will make it difficult for you to get approved for new credit and loans.
You can improve your credit report by getting these collection accounts reported as “Paid in Full” or “Paying as Agreed.”
Before you pay off a collection account, first negotiate with the debt collector to have your credit report updated to something favorable. Whatever you negotiate with your collector, ensure that you are able to fulfill the arrangement you have negotiated. If not, you collector can report your status as something unfavorable which will only serve to worsen your credit report.
Most collectors want payment in full as opposed to a settlement payment or payment plan. Depending on the member, the age of the debt, and a number of other factors, you may be in a position to negotiate a settlement on account. Collectors are always open to consider any reasonable offer and will be happy to present it to the creditor for consideration. So offer the collector a settlement payment which is some % less than the full amount owed. Remember to get the collector to agree to update the account as “Paid in full.” The agreement should be in writing.
Be sure to keep proof of payment. Monitor your credit report to make sure the collector updates the account as paid. If the collector does not update the account, dispute the account and provide proof of payment if necessary.