Paying off a collection, unless it is medical, does not improve your credit score. That is because collection agencies don't remove the item when you pay it. There is still, as credit reporting agencies say, a "serious derogatory" entry on your report. And most FICO credit scoring models still count paid collections in your credit score. You can solve this by convincing collection agencies to delete the collection from your credit history when you pay the account. It's called "pay for delete," and here is a letter to help you negotiate.
Pay for Delete Letter
The only way to increase your credit score by paying a collection account is to get the collection agency (and the original creditor, if applicable) to agree to delete the entry from your credit history.
You can send this sample letter to collection agencies when negotiating a "pay for delete."
Sample letter for you to use
Name of Collection Agency
Address of collection agency
Re: Collection Account for Original Creditor Account Number
Amount: $XXX.XX
To whom it may concern:
This is to inform you that I dispute the validity of the debt referred to above.
I am willing to pay this account IN FULL (or whatever amount you plan to pay) if you agree to immediately delete the account from all credit reporting agencies (CRAs) to which you report, and follow through with this deletion within 10 days of receipt of the agreed-upon amount.
My sole purpose is to remove the item from my file. This letter should not be interpreted as recognition of the debt or acknowledgment of liability for the debt.
If you accept the terms of this agreement, I will send the certified amount of $XXX to your collection agency.
Your agency should delete all information regarding the account from my credit files within 10 business days from the receipt of the payment, as mentioned above. The terms of this agreement will not be discussed with anyone but the original creditor. No third party will be informed if contacted and no acknowledgment of the debt, any kind of payment, or settlement will be discussed if I am contacted by the CRAs.
Following the acceptance of the agreement, please prepare a letter on your company letterhead unambiguously agreeing to the aforementioned terms and conditions and have it signed by your agency's authorized signatory. This letter will imply a legal contract, enforceable under my state law.
If I do not receive an approval letter within 15 days of your receipt of this letter, I will withdraw this offer.
Please communicate regarding this account to the address mentioned below.
Your Name
Your Address
State Zip Code
Sincerely,
Name of Debtor