If you are like most Americans, at some point in your adult life, you've found out there was a collection on your credit report. Most people understand that collections are certainly not helpful to a credit score. They can remain on a credit report for up to 7 years. The older they are, the less damage they do to your score.
 
If the collection is legitimate, you may be inclined to pay it off. It would stand to reason that by doing so, you'd see an improvement in your credit score, no?
 
Unfortunately, in many cases, once the collection is paid off, the date of last activity is updated making it appear to be a recent collection from a credit scoring standpoint. For example, if you had an old medical collection from May of 2003, and paid it off this month (April 2008), in May of 2008, the collection will appear to be very recent and very damaging to your score. Prior to paying it off, it may have only been having a minor impact on your score since it was about 5 years old.
 
So, what's the best thing to do?
 
You have several options. First, you can take your chances, pay off the collection, call it a day, and let time heal your score as the "new" collection begins to age. Another option is to negotiate with the creditor/collection agency to delete the collection in exchange for payment (make sure to get everything in writing). If the collection is deleted, your score will benefit. Finally, if the collection is close to the 7 year mark, you can simply wait for it to fall of your report.
 
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