A Collection Account Reduced My Score
I’ve heard that line a million times. “A collection account reduced my score”.
Why does this even come as a surprise? People don’t seem to understand the severity of a collection account, and the effect it can have on one’s credit score. And often people applying for a mortgage or a car lease find out the hard way, usually at the last minute.
They apply for a big loan and discover a collection account on their credit report has dropped their score to the point where they no longer qualify for the loan.
It’s important to understand that a collection account can reduce your credit score, often by up to 50 points or more. The reason a collection can reduce your credit score so much is that credit scoring is most affected by payment history, and if you fail to make payments on time your score will surely drop.
But if you fail to make payments month after month to the point where the original creditor releases your debt to a collection agency, then you shouldn’t be surprised if your credit score gets whacked, often dropping from what is considered a good score to a bad score overnight.
To truly understand the impact of a collection account on your credit score, read more about what a collection account is. Once you’ve got a good understanding of a collection account, it’ll make a lot more sense why a seemingly small offense can reduce your credit score so significantly.
You should do everything in your means to avoid allowing an account to go into collection status. Even if you pay it off, the negative mark will remain on your credit report for seven years from the date of first offense. And dealing with debt collectors and disputing a collection account can be a time-consuming, often losing affair.