Giving money to a collection agency can feel like handing your lunch money over to a schoolyard bully. But it’s different when you legitimately owe what the collection agency is asking you to pay. Paying a debt collection is often painful because the product or service associated with the debt has long been consumed. If you’re debating on whether you should pay a collection you owe, here are five benefits of getting rid of those collections for good.
1. Stop collection calls for good.
As long as you have outstanding debt collections, you’ll probably continue getting calls from debt collectors. A cease and desist letter
may end calls from one particular debt collector. However, since collection accounts
are often switched between collectors, you’ll keep being contacted about the debt until it’s taken care of.
2. Get approved for credit cards and loans.
Many banks won’t approve your credit card or loan application as long as you have outstanding collection accounts on your credit report
. This means no mortgage, no car loan, and no American Express. Even employers won’t hire you for certain jobs if you have unpaid debts on your credit report. Paying the collection won't remove it from your credit report, but a $0 balance is far better than one that's still delinquent.
3. Improve your credit score.As collections get older, they affect your credit score less. Of course, collection accounts will disappear from your credit report after seven years. As long as the accounts are still within the credit reporting time limit, a paid collection is better for your credit score than an unpaid one.
4. Eliminate the risk of being sued.
People assume that debt collectors won’t waste their time or money suing over a small collection. This assumption isn’t always true. As long as you have an outstanding collection that's still within the statute of limitations
, you run the risk of being sued for what you owe. A lawsuit could lead to a court judgment, a public record that will also tarnish your credit report for seven years. And if you still don't pay up, the collector may get court permission to garnish your wages
5. You're closer to being debt-free.Paying off a debt collection means there’s one less company you owe money to. You may feel like you’ve lost the battle if you pay a debt collection after resisting for months or years. In the long run, paying off a debt collection is better for your credit and your finances. Taking care of debt collections is a good thing, when you can afford to do it.