Paying Collections With Your Tax Return

Q. Should I pay the collection accounts that appear on my credit report when I get my tax return?

A. Before you pay an old collection account, please consider that it can lower your credit score in the short term.  When you pay an old collection account, the three credit bureaus update the account from an unpaid collection to a paid collection, which doesn't really impact your credit score.  However, when this is done, the bureaus also update the “date of last activity” on the account, so the negative mark on your account now looks recent.  Since around 35% of your credit score comes from payment history and older negative marks have a lesser effect than newer ones, your credit score may temporarily be lowered in light of the new derogatory mark on your report.  Even though around 30% of your credit score comes from the amounts owed and paying the collection reduces that amount, your credit score may still be lowered temporarily from the recent “date of last activity”, and it may take some time before your credit score increases.



MSI Credit Solutions provides superior credit restoration and comprehensive consulting services that are reliable and affordable. For any questions or to schedule a free credit consultation, contact us at (866) 217-9841.

 *The information in this article has been provided strictly for educational purposes.


Get Started Today

No Comments Yet.

Leave a comment

You must be Logged in to post a comment.